PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 9, 2003)
$4,000,000,000 CIT INTERNOTES'r'
[CIT LOGO]
CIT GROUP INC.
-------------------
We may offer to sell our CIT InterNotes'r' from time to time. The specific
terms of the notes will be set prior to the time of sale and described in a
pricing supplement. You should read this prospectus supplement, the accompanying
prospectus and the applicable pricing supplement carefully before you invest.
We may offer the notes to or through agents for resale. The amount we expect
to receive if all of the notes are sold to or through the agents is from
$3,992,000,000 to $3,880,000,000, after paying agent discounts and commissions
of between $8,000,000 and $120,000,000. We also may offer the notes directly. We
have not set a date for termination of our offering.
The agents have advised us that from time to time they may purchase and sell
notes in the secondary market, but they are not obligated to make a market in
the notes and may suspend or completely stop that activity without any notice at
any time. Unless otherwise specified in the applicable pricing supplement, we
will not list the notes on any stock exchange.
-------------------
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS, INCLUDING THOSE DESCRIBED IN
THE 'RISK FACTORS' SECTION BEGINNING ON PAGE S-6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE NOTES OR PASSED ON THE ADEQUACY
OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS OR ANY
PRICING SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
JOINT LEAD MANAGERS AND LEAD AGENTS
BANC OF AMERICA SECURITIES LLC INCAPITAL LLC
AGENTS
BANC ONE CAPITAL MARKETS, INC. CHARLES SCHWAB & CO., INC.
CITIGROUP EDWARD D. JONES & CO., L.P.
RAYMOND JAMES RBC CAPITAL MARKETS
UBS PAINEWEBBER INC. WACHOVIA SECURITIES
Prospectus Supplement dated May 9, 2003.
InterNotes'r' is a registered servicemark of Incapital Holdings LLC
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND THE
PRICING SUPPLEMENT. WE AND THE AGENTS HAVE NOT AUTHORIZED ANYONE ELSE TO PROVIDE
YOU WITH DIFFERENT OR ADDITIONAL INFORMATION. WE ARE NOT MAKING AN OFFER OF
THESE NOTES IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT
ASSUME THAT THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING
PROSPECTUS OR THE PRICING SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE
DATE ON THE FRONT OF THAT DOCUMENT.
-------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
About this Prospectus Supplement and the Pricing
Supplements............................................... S-1
Incorporation by Reference.................................. S-2
Summary..................................................... S-3
Risk Factors................................................ S-6
Description of CIT Group Inc................................ S-7
Selected Consolidated Financial Information of CIT Group
Inc....................................................... S-8
Use of Proceeds............................................. S-11
Capitalization of CIT Group Inc............................. S-12
Description of Notes........................................ S-13
Registration and Settlement................................. S-25
Material U.S. Federal Income Tax Considerations............. S-28
Employee Retirement Income Security Act..................... S-33
Plan of Distribution........................................ S-33
Legal Matters............................................... S-35
Experts..................................................... S-35
Other General Information................................... S-35
PROSPECTUS
CIT Group Inc............................................... 3
Ratio of Earnings to Fixed Charges.......................... 9
Special Note Regarding Forward-Looking Statements........... 10
Use of Proceeds............................................. 10
Description of Debt Securities.............................. 11
Plan of Distribution........................................ 16
Experts..................................................... 17
Legal Opinions.............................................. 17
Where You Can Find More Information......................... 17
ABOUT THIS PROSPECTUS SUPPLEMENT AND THE PRICING SUPPLEMENTS
Except as the context otherwise requires or as otherwise specified in this
prospectus supplement or the prospectus, as used in this prospectus supplement,
dated May 9, 2003 and the prospectus, dated May 9, 2003, the terms 'we,' 'our,'
'us,' and 'CIT' refer to CIT Group Inc. and its consolidated subsidiaries.
References in this prospectus supplement to 'U.S. dollars' or 'U.S. $' or '$'
are to the currency of the United States of America.
We may use this prospectus supplement, together with the prospectus and a
pricing supplement, to offer CIT InterNotes'r' from time to time. The total
initial public offering price of notes that may be offered by use of this
prospectus supplement is $4,000,000,000.
This prospectus supplement sets forth certain terms of the notes that we may
offer. It supplements the description of the notes contained in the prospectus,
where the notes are included in the defined term 'Debt Securities.' If
information in this prospectus supplement is inconsistent with the prospectus,
this prospectus supplement will apply and you should not rely on the information
in the prospectus.
Each time we issue notes, we will attach a pricing supplement to this
prospectus supplement. The pricing supplement will contain the specific
description of the notes being offered and the terms of the offering. The
pricing supplement may also add, update or change information in this prospectus
supplement or the prospectus. Information in the pricing supplement will replace
any inconsistent information in this prospectus supplement, including any
changes in the method of calculating interest on any note. The pricing
supplement will apply in those circumstances and you should not rely on the
information in this prospectus supplement or the prospectus.
When we refer to the prospectus, we mean the prospectus which accompanies
this prospectus supplement. When we refer to a pricing supplement, we mean the
pricing supplement we file with respect to a particular note.
You should read and consider all information contained in this prospectus
supplement, the prospectus and the pricing supplement in making your investment
decision.
S-1
INCORPORATION BY REFERENCE
The SEC allows us to 'incorporate by reference' the information we file with
them, which means we can disclose important information to you by referring you
to those documents. The information included in the following documents is
incorporated by reference and is considered to be a part of this prospectus
supplement. The most recent information that we file with the SEC automatically
updates and supersedes older information.
In addition to the items incorporated by reference into this prospectus
supplement and the prospectus as set forth in the prospectus, the following
documents shall be deemed to be incorporated in, and to form part of, this
prospectus supplement:
1. Our Annual Report on Form 10-K for the fiscal year ended
September 30, 2002.
2. Our Transition Report on Form 10-K for the transition period
from October 1, 2002 to December 31, 2002.
3. Our Current Reports on Form 8-K filed January 23, 2003,
January 24, 2003, February 28, 2003, March 5, 2003,
March 12, 2003, April 11, 2003, April 22, 2003 and
April 25, 2003.
Until we have sold all of the debt securities which we are offering for sale
under this prospectus supplement and the prospectus, we will also incorporate by
reference all documents that we file in the future pursuant to Section 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended (the
'Exchange Act').
S-2
SUMMARY
This section summarizes the legal and financial terms of the notes that are
described in more detail in 'Description of Notes' beginning on page S-13. Final
terms of any particular notes will be determined at the time of sale and will be
contained in the pricing supplement relating to those notes. The terms of the
notes appearing in that pricing supplement may vary from, and if they do vary
will supersede, the terms contained in this summary and in 'Description of
Notes.' In addition, you should read the more detailed information appearing
elsewhere in this prospectus supplement, the prospectus and in that pricing
supplement.
Issuer.................................... CIT Group Inc., 1 CIT Drive, Livingston, New Jersey
07039; phone (973) 740-5000
Purchasing Agent.......................... Incapital LLC
Joint Lead Managers and Lead Agents....... Banc of America Securities LLC and Incapital LLC
Agents.................................... Banc One Capital Markets, Inc.
Charles Schwab & Co., Inc.
Citigroup Global Markets Inc.
Edward D. Jones & Co., L.P.
Raymond James & Associates, Inc.
RBC Dain Rauscher
UBS PaineWebber Inc.
Wachovia Securities, Inc.
Title of Notes............................ CIT InterNotes'r'
Amount.................................... We may issue up to $4,000,000,000 of notes in connection
with this program. Additional notes may be issued in the
future without the consent of or notice to note holders.
The notes will not contain any limitations on our
ability to issue additional InterNotes'r' or any other
indebtedness.
Denominations............................. The notes will be issued and sold in denominations of
$1,000 and multiples of $1,000 (unless otherwise stated
in the pricing supplement).
Status.................................... The notes will be our direct unsecured senior
obligations and will rank equally with all of our other
unsecured senior indebtedness from time to time
outstanding. The notes will be junior to any
indebtedness of any of our subsidiaries unless the terms
of that indebtedness provide otherwise.
Maturities................................ Each note will mature nine months or more from its date
of original issuance.
S-3
Interest.................................. Each note will bear interest from its date of original
issuance at a fixed or floating rate.
Interest on each note will be payable either monthly,
quarterly, semi-annually or annually on each interest
payment date and on the stated maturity date. Interest
also will be paid on the date of redemption or repayment
if a note is redeemed or repurchased prior to its stated
maturity in accordance with its terms.
Principal................................. The principal amount of each note will be payable on its
stated maturity date at the corporate trust office of
the paying agent or at any other place we may designate.
Redemption and Repayment.................. Unless otherwise stated in the applicable pricing
supplement, a note will not be redeemable at our option
or be repayable at the option of the holder prior to its
stated maturity date. The notes will not be subject to
any sinking fund.
Survivor's Option......................... Specific notes may contain a provision permitting the
optional repayment of those notes prior to stated
maturity, if requested by the authorized representative
of the beneficial owner of those notes, following the
death of the beneficial owner of the notes, so long as
the notes were owned by the beneficial owner or his or
her estate at least six months prior to the request.
This feature is referred to as a 'Survivor's Option.'
Your notes will not be repaid in this manner unless the
pricing supplement for your notes provides for the
Survivor's Option. The right to exercise the Survivor's
Option is subject to limits set by us on (1) the
permitted dollar amount of total exercises by all
holders of notes in any calendar year, and (2) the
permitted dollar amount of an individual exercise by a
holder of a note in any calendar year. Additional
details on the Survivor's Option are described in the
section entitled 'Description of Notes -- Survivor's
Option' on page S-22.
Sale and Clearance........................ We will sell notes in the United States only. Notes will
be issued in book-entry only form and will clear through
The Depository Trust Company. We do not intend to issue
notes in certificated form.
Trustee................................... The trustee for the notes is Bank One Trust Company,
N.A. under an indenture dated as of August 26, 2002.
S-4
Selling Group............................. The agents and dealers comprising the selling group are
broker-dealers and securities firms. The agents,
including the Purchasing Agent, have entered into a
selling agent agreement with us dated May 9, 2003 (the
'selling agent agreement'). Dealers who are members of
the selling group have executed a master selected dealer
agreement with the Purchasing Agent (the 'master
selected dealer agreement'). The agents and the dealers
have agreed to market and sell the notes in accordance
with the terms of those respective agreements and all
other applicable laws and regulations. You may contact
the Purchasing Agent at info@incapital.com for a list of
selling group members.
S-5
RISK FACTORS
You should carefully consider the following discussion of risks, and the
other information, provided and incorporated by reference in this prospectus
supplement and the accompanying prospectus. The notes will not be an appropriate
investment for you if you are not knowledgeable about significant features of
the notes, about our financial condition, operations and business or financial
matters in general. You should not purchase the notes unless you understand, and
know that you can bear, these risks.
THE MARKET VALUE OF THE NOTES MAY BE AFFECTED BY FACTORS IN ADDITION TO CREDIT
RATINGS.
Any credit ratings that are assigned to the notes may not reflect the
potential impact of all risks on the market value of the notes.
WE MAY CHOOSE TO REDEEM NOTES WHEN PREVAILING INTEREST RATES ARE RELATIVELY LOW.
If your notes will be redeemable at our option, we may choose to redeem your
notes from time to time, especially when prevailing interest rates are lower
than the rate borne by the notes. If prevailing rates are lower at the time of
redemption, you would not be able to reinvest the redemption proceeds in a
comparable security at an effective interest rate as high as the interest rate
on the notes being redeemed. Our redemption right also may adversely impact your
ability to sell your notes as the optional redemption date or period approaches.
ANY SURVIVOR'S OPTION MAY BE LIMITED IN AMOUNT.
We will have a discretionary right to limit the aggregate principal amount
of notes subject to any Survivor's Option that may be exercised in any calendar
year to an amount equal to the greater of $2,000,000 or 2% of the outstanding
principal amount of all notes outstanding as of the end of the most recent
calendar year. We also have the discretionary right to limit to $250,000 in any
calendar year the aggregate principal amount of notes subject to the Survivor's
Option that may be exercised in such calendar year on behalf of any individual
deceased beneficial owner of notes. Accordingly, no assurance can be given that
exercise of the Survivor's Option for a desired amount will be permitted in any
single calendar year.
THE NOTES MAY HAVE LIMITED OR NO LIQUIDITY.
There is currently no secondary market for the notes, and there can be no
assurance that a secondary market will develop. If a secondary market does
develop, there can be no assurance that it will continue or that it will be
sufficiently liquid to allow you to resell your notes when you want or at a
price that you wish to receive for your notes.
S-6
DESCRIPTION OF CIT GROUP INC.
CIT is a leading global commercial and consumer finance company that was
founded in 1908. We are a source of financing and leasing capital for companies
in a wide variety of industries, including many of today's leading industries
and emerging businesses, offering vendor, equipment, commercial, factoring,
consumer, and structured financing capabilities. Our principal executive offices
are located at 1 CIT Drive, Livingston, New Jersey 07039 and our telephone
number is (973) 740-5000. CIT is a corporation of perpetual duration and is
governed under the laws of the State of Delaware. The original predecessor to
CIT commenced operations on February 11, 1908. CIT was incorporated on
March 12, 2001. We have a broad array of 'franchise' businesses that focus on
specific industries, asset types and markets, which are balanced by client,
industry and geographic diversification. Managed assets were $46.4 billion,
owned financing and leasing assets were $35.9 billion and stockholders' equity
was $4.9 billion at December 31, 2002.
On July 8, 2002, our former parent, Tyco International Ltd. ('Tyco'),
completed a sale of 100% of CIT's outstanding common stock in an initial public
offering. Immediately prior to the offering, a restructuring was effectuated
whereby our predecessor, CIT Group Inc., a Nevada corporation (which is referred
to in this prospectus supplement as CIT Group Inc. (Nevada)), was merged with
and into its parent Tyco Capital Holding, Inc. ('TCH'), a Nevada corporation,
and that combined entity was further merged with and into CIT Group Inc. (Del),
a Delaware corporation. In connection with the reorganization, CIT Group Inc.
(Del) was renamed CIT Group Inc. As a result of the reorganization, CIT is the
successor to CIT Group Inc. (Nevada)'s business, operations, obligations and SEC
registration.
S-7
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF CIT GROUP INC.
On June 1, 2001, CIT was acquired by TCH, a wholly-owned subsidiary of Tyco,
in a purchase business combination recorded under the 'push-down' method of
accounting, resulting in a new basis of accounting for the 'successor' period
beginning June 2, 2001. Information relating to all 'predecessor' periods prior
to the acquisition is presented using CIT's historical basis of accounting.
Following the Tyco acquisition, we adopted Tyco's fiscal year ending
September 30. To assist in the comparability of our financial results and
discussions, results of operations for the nine months ended September 30, 2001
include results for five months of the predecessor and four months of the
successor and are designated as 'combined.'
On July 8, 2002, our former parent, Tyco, completed a sale of 100% of CIT's
outstanding common stock in an initial public offering. Immediately prior to the
offering, CIT was merged with its parent TCH, a company used to acquire CIT. As
a result of the reorganization, the historical financial statements of TCH are
included in the historical consolidated CIT financial statements. Prior to the
offering on July 8, 2002, the activity of TCH consisted primarily of interest
expense to an affiliate of Tyco, and the TCH accumulated net deficit was
relieved via a capital contribution from Tyco. There was no TCH activity
subsequent to June 30, 2002. The results for both the periods ended
September 30, 2002 and September 30, 2001 include activity of TCH. Therefore,
certain previously reported CIT data may differ from the data presented below,
due primarily to the inter-company debt and related interest expense of TCH.
On November 5, 2002, the CIT board of directors approved returning to a
calendar year end from a September 30 fiscal year end. As a result, the three
months ended December 31, 2002 constitutes a transitional fiscal period.
The following tables set forth selected consolidated financial information
regarding CIT's results of operations and balance sheets. The financial data at
December 31, 2002, September 30, 2002 and September 30, 2001, and for the three
month period ended December 31, 2002, the year ended September 30, 2002, the
period from June 2, 2001 through September 30, 2001, the period from January 1,
2001 through June 1, 2001 and the year ended December 31, 2000, were derived
from the audited Consolidated Financial Statements of CIT incorporated by
reference in this prospectus supplement and the accompanying prospectus. The
financial data at December 31, 2000, 1999 and 1998 and for each of the two years
in the period ended December 31, 1999 were derived from audited financial
statements that are not incorporated by reference in this prospectus supplement
and the accompanying prospectus. To assist in the comparability of our financial
results the financial information in the following tables combines the
'predecessor period' (January 1 through June 1, 2001) with the 'successor
period' (June 2 through September 30, 2001) to present 'combined' results for
the nine months ended September 30, 2001. You should read the selected
consolidated financial data below in conjunction with our consolidated financial
statements. See 'Where You Can Find More Information' in the accompanying
prospectus and 'Incorporation by Reference' in this prospectus supplement.
S-8
THREE MONTHS TWELVE MONTHS NINE MONTHS
ENDED ENDED ENDED YEARS ENDED DECEMBER 31,
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, -----------------------------------------
($ IN MILLIONS, EXCEPT PER SHARE 2002 2002 2001 2000 1999 1998
DATA) ---- ---- ---- ---- ---- ----
(SUCCESSOR) (SUCCESSOR) (COMBINED) (PREDECESSOR)
RESULTS OF OPERATIONS
Net finance margin.......... $354.4 $1,662.5 $1,318.8 $1,469.4 $ 917.4 $804.8
Provision for credit losses... 133.4 788.3 332.5 255.2 110.3 99.4
Operating margin............ 478.1 1,806.5 1,558.9 2,126.2 1,157.9 960.8
Salaries and general
operating expenses........ 242.1 946.4 794.5 1,035.2 516.0 407.7
Goodwill impairment......... -- 6,511.7 -- -- -- --
Goodwill amortization....... -- -- 97.6 86.3 25.7 10.1
Acquisition related costs... -- -- 54.0 -- -- --
Interest expense -- TCH..... -- 662.6 98.8 -- -- --
Net income (loss)........... 141.3 (6,698.7) 263.3 611.6 389.4 338.8
Net income (loss) per
share(1) -- basic and
diluted................... 0.67 (31.66) 1.24 2.89 1.84 1.60
Dividends per share(1)...... 0.12 -- 0.25 0.50 0.31 0.23
AT DECEMBER 31,
AT DECEMBER 31, AT SEPTEMBER 30, AT SEPTEMBER 30, --------------------------------------------
2002 2002 2001 2000 1999 1998
($ IN MILLIONS) ---- ---- ---- ---- ---- ----
(SUCCESSOR) (SUCCESSOR) (SUCCESSOR) (PREDECESSOR) (PREDECESSOR) (PREDECESSOR)
BALANCE SHEET DATA
Total finance
receivables......... $27,621.3 $28,459.0 $31,879.4 $33,497.5 $31,007.1 $19,856.0
Reserve for credit
losses.............. 760.8 777.8 492.9 468.5 446.9 263.7
Operating lease
equipment, net...... 6,704.6 6,567.4 6,402.8 7,190.6 6,125.9 2,774.1
Goodwill, net......... 384.4 384.4 6,547.5 1,964.6 1,850.5 216.5
Total assets.......... 41,932.4 42,710.5 51,349.3 48,689.8 45,081.1 24,303.1
Commercial paper...... 4,974.6 4,654.2 8,869.2 9,603.5 8,974.0 6,144.1
Variable-rate bank
credit facilities... 2,118.0 4,037.4 -- -- -- --
Variable-rate senior
notes............... 4,906.9 5,379.0 9,614.6 11,130.5 7,147.2 4,275.0
Fixed-rate senior
notes............... 19,681.8 18,385.4 17,113.9 17,571.1 19,052.3 8,032.3
Subordinated
fixed-rate notes.... -- -- 100.0 200.0 200.0 200.0
Company-obligated
mandatorily
redeemable preferred
securities of
subsidiary trust
holding solely
debentures of the
Company............. 257.2 257.7 260.0 250.0 250.0 250.0
Stockholders'
equity.............. 4,870.7 4,757.8 5,947.6(2) 6,007.2 5,554.4 2,701.6
Tangible stockholders'
equity.............. 4,486.3 4,373.4 4,028.5(2) 4,042.6 3,703.9 2,485.1
---------
(1) Net income (loss) and dividend per share calculations for
the periods preceding September 30, 2002 are based on the
number of common shares outstanding (basic and diluted of
211.6 million and 211.7 million, respectively) upon the
completion of the July 2002 initial public offering.
(2) Stockholders' equity and tangible stockholder's equity
excludes TCH results due to its temporary status as a Tyco
acquisition company with respect to CIT.
S-9
AT OR FOR AT OR FOR AT OR FOR
THE THE THE
THREE MONTHS TWELVE MONTHS NINE MONTHS
ENDED ENDED ENDED AT OR FOR THE YEARS ENDED DECEMBER 31,
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, ------------------------------------------
2002 2002 2001 2000 1999 1998
($ IN MILLIONS) ---- ---- ---- ---- ---- ----
(SUCCESSOR) (SUCCESSOR) (COMBINED) (PREDECESSOR) (PREDECESSOR) (PREDECESSOR)
SELECTED DATA AND RATIOS
PROFITABILITY
Net finance margin as a
percentage of average
earning assets
('AEA')(1).............. 4.34% 4.64% 4.34% 3.61% 3.59% 3.93%
Ratio of earnings to fixed
charges(3).............. 1.67x (8) 1.30x 1.39x 1.45x 1.49x
OTHER OPERATING RATIOS
Salaries and general
operating expenses
(excluding goodwill
amortization) as a
percentage of average
managed assets
('AMA')(4).............. 2.18% 2.01% 2.09% 2.01% 1.75% 1.78%
Efficiency ratio(5)....... 39.6% 36.5% 42.0% 43.8% 41.3% 39.2%
CREDIT QUALITY
60+ days contractual
delinquency as a
percentage of finance
receivables............. 3.63% 3.76% 3.46% 2.98% 2.71% 1.75%
Non-accrual loans as a
percentage of finance
receivables............. 3.43% 3.43% 2.67% 2.10% 1.65% 1.06%
Net credit losses as a
percentage of average
finance receivables..... 2.32% 1.67% 1.20% 0.71% 0.42% 0.42%
Reserve for credit losses
as a percentage of
finance receivables..... 2.75% 2.73% 1.55% 1.40% 1.44% 1.33%
LEVERAGE
Total debt (net of
overnight deposits) to
tangible stockholders'
equity(2)(6)............ 6.22x 6.54x 8.20x 8.78x 8.75x 6.82x
Tangible stockholders'
equity(2) to managed
assets(7)............... 10.4% 9.9% 8.6% 7.8% 7.7% 10.4%
OTHER
Total managed assets(7)... $46,357.1 $47,622.3 $50,877.1 $54,900.9 $51,433.3 $26,216.3
Employees................. 5,835 5,850 6,785 7,355 8,255 3,230
---------
(1) 'AEA' means average earning assets, which is the average of
finance receivables, operating lease equipment, finance
receivables held for sale and certain investments, less
credit balances of factoring clients.
(2) Tangible stockholders' equity excludes goodwill and other
intangible assets and excludes TCH results due to its
temporary status as a Tyco acquisition company with respect
to CIT. Tangible stockholders' equity also excludes certain
unrealized losses relating
(footnotes continued on next page)
S-10
(footnotes continued from previous page)
to derivative financial instruments and other investments,
as these losses are not necessarily indicative of amounts
which will be realized.
(3) For purposes of determining the ratio of earnings to fixed
charges, earnings consist of income before income taxes and
fixed charges. Fixed charges consist of interest on
indebtedness, minority interest in subsidiary trust holding
solely debentures of the Company and one-third of rent
expense, which is deemed representative of an interest
factor.
(4) 'AMA' means average managed assets, which is average earning
assets plus the average of finance receivables previously
securitized and still managed by us.
(5) Efficiency ratio is the ratio of salaries and general
operating expenses to operating margin, excluding the
provision for credit losses.
(6) Total debt excludes, and tangible stockholders' equity
includes, Company-obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely debentures of
the Company.
(7) 'Managed assets' means assets previously securitized and
still managed by us and include (i) financing and leasing
assets, (ii) certain investments and (iii) off-balance sheet
finance receivables.
(8) Earnings were insufficient to cover fixed charges by
$6,331.1 million for the twelve months ended September 30,
2002. Earnings for the twelve months ended September 30,
2002 included a non-cash goodwill impairment charge of
$6,511.7 million in accordance with SFAS No. 142, 'Goodwill
and Other Intangible Assets.' The ratio of earnings to fixed
charges included fixed charges of $1,471.8 million and a
loss before provision for income taxes of $6,331.1 million
resulting in a total loss provision for income taxes and
fixed charges of $(4,859.3) million.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the notes to provide
additional working funds for us and our subsidiaries. Generally, we use the
proceeds of our short-term borrowings primarily to originate and purchase
receivables in the ordinary course of our business. We have not yet determined
the amounts which we may use in connection with our business or which we may
furnish to our subsidiaries. From time to time, we may also use the proceeds to
finance bulk purchases of receivables and/or the acquisition of other
finance-related businesses.
S-11
CAPITALIZATION OF CIT GROUP INC.
The following table sets forth our capitalization as of December 31, 2002.
This table should be read in conjunction with 'Selected Consolidated Financial
Information of CIT Group Inc.,' which is included elsewhere in this prospectus
supplement.
DECEMBER 31, 2002
-----------------
(IN MILLIONS OF
U.S. DOLLARS)
Commercial paper............................................ $ 4,974.6
Bank credit facilities...................................... 2,118.0
Term debt................................................... 24,588.7
CIT obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely debentures of CIT
('Preferred Capital Securities').......................... 257.2
Stockholders' equity:
Preferred stock, $0.01 par value, 100,000,000
authorized; none issued and outstanding............... --
Common stock, $0.01 par value, 600,000,000 authorized;
211,573,200 issued and outstanding.................... 2.1
Additional paid in capital.............................. 10,676.2
Accumulated deficit..................................... (5,606.9)
Accumulated other comprehensive loss.................... (200.7)
---------
Total stockholders' equity.............................. 4,870.7
---------
Total capitalization........................................ 36,809.2
Goodwill.................................................... (384.4)
---------
Total tangible capitalization............................... $36,424.8
---------
---------
Total tangible stockholders' equity......................... $ 4,486.3
---------
---------
S-12
DESCRIPTION OF NOTES
The following description of the particular terms of the notes being offered
supplements and, to the extent inconsistent with or to the extent otherwise
specified in an applicable pricing supplement, replaces the description of the
general terms and provisions of the debt securities set forth under the headings
'Description of Debt Securities' in the prospectus. Unless otherwise specified
in an applicable pricing supplement, the notes will have the terms described
below. Capitalized terms used but not defined below have the meanings given to
them in the prospectus and in the indenture relating to the notes.
The notes being offered by this prospectus supplement, the prospectus and
the applicable pricing supplement will be issued under an indenture dated as of
August 26, 2002 (the 'indenture'), among CIT Group Inc., Bank One Trust Company,
N.A., as trustee (the 'trustee') and Bank One NA, London Branch, as London
paying agent and London calculation agent. The indenture is more fully described
in the prospectus. The indenture does not limit the aggregate amount of debt
securities that may be issued under it and provides that the debt securities may
be issued under it from time to time in one or more series. The following
statements are summaries of the material provisions of the indenture and the
notes. These summaries do not purport to be complete and are qualified in their
entirety by reference to the indenture, including for the definitions of certain
terms. The notes constitute a single series of debt securities for purposes of
the indenture and are limited to an aggregate principal amount of up to
$4,000,000,000. We may increase the foregoing limit, however, without the
consent of any holders of the notes, by appropriate corporate action if in the
future we wish to sell additional notes.
Notes issued in accordance with this prospectus supplement, the prospectus
and the applicable pricing supplement will have the following general
characteristics:
the notes will be our direct unsecured senior obligations
and will rank equally with all of our other unsecured senior
indebtedness from time to time outstanding;
the notes may be offered from time to time by us through the
Purchasing Agent and each note will mature on a day that is
at least nine months from its date of original issuance;
each note will bear interest from its date of original
issuance at a fixed or floating rate;
the notes will not be subject to any sinking fund; and
the minimum denomination of the notes will be $1,000 (unless
otherwise stated in the pricing supplement).
In addition, the pricing supplement relating to each offering of notes will
describe specific terms of the notes, including:
whether the note is a fixed rate note or a floating rate
note;
the price, which may be expressed as a percentage of the
aggregate initial public offering price of the notes, at
which the notes will be issued to the public;
the date on which the notes will be issued to the public;
the stated maturity date of the notes;
if the note is a fixed rate note, the rate per year at which
the notes will bear interest;
if the note is a floating rate note, the interest rate
basis, the initial interest rate, the interest determination
date, the interest reset dates, the interest payment dates,
the index maturity, the maximum interest rate and the
minimum interest rate, if any, and the spread and/or spread
multiplier, if any, and any other terms relating to the
particular method of calculating the interest
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rate for the note (see 'Description of the Notes -- Floating
Rate Notes' for an explanation of the terms relating to
floating rate notes);
the interest payment frequency;
the purchase price, Purchasing Agent's discount and net
proceeds to us;
whether the authorized representative of the holder of a
beneficial interest in the note will have the right to seek
repayment upon the death of the holder as described under
' -- Survivor's Option' on page S-22;
if the notes may be redeemed at our option or repaid at the
option of the holder prior to its stated maturity date, the
provisions relating to any such redemption or repayment;
any special U.S. Federal income tax consequences of the
purchase, ownership and disposition of the notes; and
any other significant terms of the notes not inconsistent
with the provisions of the indenture.
We may at any time purchase notes at any price or prices in the open market
or otherwise. Notes so purchased by us may, at our discretion, be held, resold
or surrendered to the trustee for cancellation.
PAYMENT OF PRINCIPAL AND INTEREST
Principal of and interest on beneficial interests in the notes will be made
in accordance with the arrangements then in place between the paying agent and
The Depository Trust Company ('DTC') and its participants as described under
'Registration and Settlement -- The Depository Trust Company' on page S-25.
Payments in respect of any notes in certificated form will be made as described
under 'Registration and Settlement -- Registration, Transfer and Payment of
Certificated Notes' on page S-28.
Interest on each note will be payable either monthly, quarterly,
semi-annually or annually on each interest payment date and at the note's stated
maturity or on the date of redemption or repayment if a note is redeemed or
repaid prior to maturity. Interest is payable to the person in whose name a note
is registered at the close of business on the regular record date before each
interest payment date. Interest due at a note's stated maturity or on a date of
redemption or repayment will be payable to the person to whom principal is
payable.
We will pay any administrative costs imposed by banks in connection with
making payments in immediately available funds, but any tax, assessment or
governmental charge imposed upon any payments on a note, including, without
limitation, any withholding tax, is the responsibility of the holders of
beneficial interests in the note in respect of which such payments are made.
INTEREST AND INTEREST RATES
The notes may bear interest at:
a fixed rate; or
a floating rate, which may be based on one of the following
rates (see 'Floating Rate Notes' for a further description
of each of these floating rates):
LIBOR (a note issued with this rate is referred to in this
prospectus supplement as a 'LIBOR note');
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Treasury Rate (a note issued with this rate is referred to
in this prospectus supplement as a 'Treasury Rate note');
Federal Funds Rate (a note issued with this rate is referred
to in this prospectus supplement as a 'Federal Funds Rate
note');
Prime Rate (a note issued with this rate is referred to in
this prospectus supplement as a 'Prime Rate note'); and
a rate as otherwise specified in the pricing supplement.
Each note will accrue interest from its date of original issuance until its
stated maturity or earlier redemption or repayment. The applicable pricing
supplement will specify a fixed interest rate or a floating rate index or
formula. Interest will be payable monthly, quarterly, semi-annually or annually.
Interest payments on each note will include the amount of interest accrued from
and including the last interest payment date to which interest has been paid (or
from and including the date of original issuance if no interest has been paid
with respect to the note) to, but excluding, the applicable interest payment
date, stated maturity date or date of earlier redemption or repayment, as the
case may be.
The interest rate on the notes will in no event be higher than the maximum
rate permitted by New York law as the same may be modified by United States law
of general application. Under present New York law, the maximum rate of interest
which may be charged to a corporation is 25% per year simple interest. This
limit does not apply to notes in a principal amount of U.S. $2,500,000 or more.
Interest on a note will be payable beginning on the first interest payment
date after its date of original issuance to holders of record on the
corresponding regular record date.
PAYMENT OF INTEREST
Unless otherwise specified in the applicable pricing supplement, interest on
the notes will be paid as follows:
INTEREST PAYMENT FREQUENCY INTEREST PAYMENT DATES
Monthly.............................. Fifteenth day of each calendar month, beginning in
the first calendar month following the month the
note was issued.
Quarterly............................ Fifteenth day of every third month, beginning in the
third calendar month following the month the note
was issued.
Semi-annually........................ Fifteenth day of every sixth month, beginning in the
sixth calendar month following the month the note
was issued.
Annually............................. Fifteenth day of every twelfth month, beginning in
the twelfth calendar month following the month the
note was issued.
The regular record date for any interest payment date will be the first day
of the calendar month in which the interest payment date occurs, except that the
regular record date for interest due on the note's stated maturity date or date
of earlier redemption or repayment will be that particular date.
'Business day' means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which commercial banks are authorized or
required by law, regulation or executive order to close in The City of New York.
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FIXED RATE NOTES
Each fixed rate note will bear interest from its date of original issuance
at the annual fixed interest rate stated in the applicable pricing supplement.
Unless the applicable pricing supplement specifies otherwise, interest on
fixed rate notes will be computed on the basis of a 360-day year of twelve
30-day months.
If the stated maturity date, date of earlier redemption or repayment or
interest payment date for any note is not a business day, principal and interest
for that note will be paid on the next business day, and no interest will accrue
on the amount payable from, and after, the stated maturity date, date of earlier
redemption or repayment or interest payment date.
FLOATING RATE NOTES
Unless the applicable pricing supplement specifies otherwise, floating rate
notes will have the terms described below. Each floating rate note will bear
interest from its date of original issuance at the floating rate per year based
on the interest rate index or other interest rate formula specified in the
applicable pricing supplement. Unless the applicable pricing supplement
specifies otherwise, the interest rate on each floating rate note will be equal
to:
an interest rate determined by reference to the interest
rate index specified in the applicable pricing supplement
plus or minus the spread, if any, and/or
an interest rate calculated by reference to the interest
rate index specified in the applicable pricing supplement
multiplied by the spread multiplier, if any.
The 'spread' is the number of basis points (one one-hundredth of a
percentage point) specified in the applicable pricing supplement as an
adjustment to the interest rate for a floating rate note. The 'spread
multiplier' is the factor specified in the applicable pricing supplement as an
adjustment to the interest rate for a floating rate note.
Any floating rate note may also have either or both of the following terms:
a maximum limitation, or ceiling, on the rate of interest
which may accrue during any interest period (the 'maximum
interest rate'); and
a minimum limitation, or floor, on the rate of interest
which may accrue during any interest period (the 'minimum
interest rate').
The applicable pricing supplement for a floating rate note will specify the
interest rate index and the spread and/or spread multiplier, if any, or other
interest rate formula and the maximum or minimum interest rate, if any.
The calculation agent will compute interest on floating rate notes in the
manner set forth below.
If any interest payment date for any floating rate note (other than the
note's stated maturity date or the date of redemption or repayment) would
otherwise be a day that is not a business day, then the interest payment date
will be postponed to the following day which is a business day, except that in
the case of a LIBOR note, if this business day falls in the next succeeding
calendar month, then the interest payment date will be the immediately preceding
business day. If the stated maturity date (or the date of redemption or
repayment) of a floating rate note falls on a day which is not a business day,
then we will make the required payment of principal, premium, if any, and/or
interest on the following day which is a
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business day as if it were made on the date this payment was due, and no
interest shall accrue as a result of this delayed payment.
We will calculate accrued interest on a floating rate note by adding the
interest factors calculated for each day in the period for which we are
calculating accrued interest. We will compute the 'interest factor' for each day
by multiplying the face amount of the floating rate note by the interest rate
applicable to the day and dividing the product thereof by 360, or, in the case
of any Treasury Rate note, by the actual number of days in the year.
We will reset the rate of interest on each floating rate note daily, weekly,
monthly, quarterly, semi-annually or annually or on some other basis as
specified in the applicable pricing supplement (the first date on which the
reset interest rate becomes effective, being an 'interest reset date'). If any
interest reset date for any floating rate note is not a business day, the
interest reset date for that floating rate note shall be postponed to the next
succeeding business day, except that in the case of a LIBOR note, if this
business day is in the next succeeding calendar month, that interest reset date
will be the immediately preceding business day.
The 'interest determination dates' are the dates as of which the calculation
agent will determine the new interest rate that will take effect on the interest
reset date. With respect to determining an interest determination date, unless
the applicable pricing supplement specifies to the contrary:
the interest determination date for a Federal Funds Rate
note or Prime Rate note is the second business day before
the interest reset date;
the interest determination date for a LIBOR note is the
second London business day before the interest reset date;
and
the interest determination date for a Treasury Rate note is
the day of the week in which such interest reset date falls
on which direct obligations of the United States ('Treasury
bills') would normally be auctioned. Treasury bills are
usually sold at auction on Monday of each week, unless that
day is a legal holiday, in which case the auction is usually
held on Tuesday. The auction, however, may be held on the
preceding Friday. If so, that Friday will be the interest
determination date for the interest reset date occurring in
the next week.
'London business day' means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
Unless the applicable pricing supplement specifies otherwise, the interest
rate determined with respect to any interest determination date for any floating
rate note will become effective on and as of the next succeeding interest reset
date. However, the interest rate in effect with respect to any floating rate
note for the period from the issue date to the first interest reset date will be
the 'initial interest rate' as specified in the applicable pricing supplement.
The interest rate for a floating rate note will be applicable from and including
the interest reset date to which it relates to but not including the next
interest reset date or until the note's stated maturity date or date of earlier
redemption or repayment, as the case may be.
Unless otherwise specified in the applicable pricing supplement, the trustee
will be the calculation agent and will determine the applicable interest rate on
each interest determination date. The calculation agent will, upon the request
of the holder of any floating rate note and to the extent available, provide the
interest rate then in effect for the note and, if different, the interest rate
to be in effect as a result of a determination made on the most recent interest
determination date with respect to the note. Unless the pricing supplement
specifies otherwise, all percentages resulting from any calculation of the rate
of interest on floating rate notes will be rounded, if necessary, to the nearest
one hundred thousandth of a percentage
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point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)). All dollar
amounts used in or resulting from that calculation will be rounded to the
nearest cent (with one-half cent being rounded upward).
LIBOR Notes. Each LIBOR note will bear interest at a rate calculated using
LIBOR and the spread and/or spread multiplier, if any, specified in the
applicable pricing supplement.
Unless the applicable pricing supplement specifies otherwise, the
calculation agent will determine LIBOR with respect to any interest reset date
according to the method specified in the pricing supplement, in accordance with
the following provisions:
if 'LIBOR Telerate' is specified as the reporting service in
the applicable pricing supplement, LIBOR will be the rate
for deposits in U.S. dollars having the index maturity
designated in the applicable pricing supplement, commencing
on the second London business day immediately following the
interest determination date, that appears on the designated
LIBOR page as of 11:00 a.m., London time, on that interest
determination date; and
if 'LIBOR Reuters' is specified as the reporting service in
the applicable pricing supplement, LIBOR will be the
arithmetic mean of the offered rates (unless the designated
LIBOR page by its terms provides only for a single rate, in
which case such single rate shall be used) for deposits in
U.S. dollars having the index maturity designated in the
applicable pricing supplement, commencing on the second
London business day immediately following such Interest
determination date, that appear (or, if only a single rate
is required, appears) on the designated LIBOR page as of
11:00 a.m., London time, on that interest determination
date, provided that at least two such offered rates appear.
If, the rate index is 'LIBOR Reuters,' and fewer than two offered rates
appear, or LIBOR Reuters is not available, or if the rate index is 'LIBOR
Telerate' and no rate appears, or LIBOR Telerate is not available, then we will
determine LIBOR as follows:
The calculation agent will select the principal London
offices of four major banks in the London interbank market,
and will request each bank to provide its offered quotation
for deposits in U.S. dollars for the period of the index
maturity designated in the applicable pricing supplement,
commencing on the second London business day immediately
following the interest determination date, to prime banks in
the London interbank market at approximately 11:00 a.m.,
London time, on the interest determination date and in a
principal amount equal to an amount that is representative
for a single transaction in the index currency in the market
at that time.
If at least two of these banks provide a quotation, the
calculation agent will compute LIBOR on the interest
determination date as the arithmetic mean of the quotations.
If fewer than two of these banks provide a quotation, the
calculation agent will select three major banks in the City
of New York to provide a rate quote. The calculation agent
will compute LIBOR on the interest determination date as the
arithmetic mean of these quoted rates at approximately
3:00 p.m., New York City time, on the interest determination
date in U.S. dollars for loans to leading European banks,
having the index maturity designated in the applicable
pricing supplement commencing on the second London business
day immediately following the interest determination date
and in a principal amount that is representative for a
single transaction in the market at that time.
If none of these banks provides a quotation as mentioned,
the rate of interest will be the same as that in effect on
the interest determination date.
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The 'designated LIBOR page' means (a) if 'LIBOR Telerate' is specified in
the applicable pricing supplement, the display on Moneyline Telerate (or any
successor service) on the page specified in the applicable pricing supplement
(or any other page as may replace this page on that service) for the purpose of
displaying the London interbank offered rates of major banks or (b) if 'LIBOR
Reuters' is specified in the applicable pricing supplement, the display on the
Reuters Monitor Money Rates Service (or any successor service) on the page
specified in the applicable pricing supplement (or any other page as may replace
this page on that service) for the purpose of displaying the London interbank
offered rates of major banks.
If neither 'LIBOR Reuters' nor 'LIBOR Telerate' is specified in the
applicable pricing supplement, LIBOR will be determined as if LIBOR Telerate had
been specified.
Treasury Rate Notes. Each Treasury Rate note will bear interest at the rate
calculated using the Treasury Rate and the spread and/or spread multiplier, if
any, specified in the applicable pricing supplement.
Unless the applicable pricing supplement specifies otherwise, 'Treasury
Rate' means the rate for the auction held on the interest determination date of
Treasury bills having the index maturity specified in the applicable pricing
supplement as that rate appears on the display on Moneyline Telerate (or any
successor service) on page 56 (or any other page as may replace this page on
that service) ('Telerate Page 56') or page 57 (or any other page which replaces
this page on that service) ('Telerate Page 57') under the heading 'INVESTMENT
RATE.'
If the rate cannot be set as described above, the calculation agent will use
the following methods in succession:
If the rate is not published as described above by 3:00
p.m., New York City time, on the calculation date, the
Treasury Rate will be the auction average rate of Treasury
bills (expressed as a bond equivalent on the basis of a year
of 365 or 366 days, as the case may be, and applied on a
daily basis) as otherwise announced by the United States
Department of Treasury.
In the event that the auction rate of Treasury bills having
the index maturity specified in the applicable pricing
supplement is not published by 3:00 p.m., New York City
time, on the calculation date, or if no auction is held,
then the Treasury Rate will be the rate (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as the
case may be, and applied on a daily basis) on the interest
determination date of Treasury bills having the index
maturity specified in the applicable pricing supplement as
published in H.15(519) under the heading 'U.S. Government
Securities/Treasury Bills/Secondary Market' or, if not yet
published by 3:00 p.m., New York City time, on the
calculation date, the rate on the interest determination
date of Treasury bills as published in H.15 Daily Update, or
other recognized electronic source used for the purpose of
displaying that rate, under the caption 'U.S. Government
Securities/Treasury Bills/Secondary Market.'
If the rate is not yet published in H.15(519), H.15 Daily
Update or another recognized electronic source, then the
Treasury Rate will be calculated as a yield to maturity
(expressed as a bond equivalent, on the basis of a year of
365 or 366 days, as the case may be, and applied on a daily
basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 p.m., New York City time, on
the interest determination date, of three leading primary
United States government securities dealers in the City of
New York selected by the calculation agent for the issue of
Treasury bills with a remaining maturity closest to the
applicable index maturity.
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If fewer than three of the dealers are quoting as mentioned,
then the rate of interest will be the same as that in effect
on that interest determination date.
'Calculation date' means the earlier of:
the business day immediately preceding the applicable
interest payment date, the stated maturity date or the date
of redemption or repayment, as the case may be; or
the fifth business day after an interest determination date
relating to the note.
'H.15(519)' means 'Statistical Release H.15(519), Selected Interest Rates,'
or any successor publication as published weekly by the Board of Governors of
the Federal Reserve System.
'H.15 Daily Update' means the daily update of H.15(519), available through
the world wide web site of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
Federal Funds Rate Notes. Each Federal Funds Rate note will bear interest at
the rate calculated using the Federal Funds Rate and the spread and/or spread
multiplier, if any, specified in the applicable pricing supplement.
Unless the applicable pricing supplement specifies otherwise, 'Federal Funds
Rate' means, for an interest determination date, the rate on that date for
Federal Funds as published in H.15(519) under the heading 'Federal Funds
(Effective),' as this rate is displayed on Moneyline Telerate (or any successor
service) on page 120 (or any other page as may replace this page on that
service) ('Telerate Page 120').
If the rate cannot be set as described above, the calculation agent will use
the following methods in succession:
If the rate does not appear on Telerate Page 120 or is not
yet published by 3:00 p.m. New York City time, on the
calculation date, then the Federal Funds Rate will be the
rate on the interest determination date as published in the
H.15 Daily Update or another recognized electronic source
used for the purpose of displaying this rate under the
heading 'Federal Funds (Effective).'
If the rate does not appear on Telerate Page 120 or is not
yet published in H.15(519), H.15 Daily Update or another
recognized electronic source by 3:00 p.m., New York City
time, on the calculation date, then the Federal Funds Rate
for the interest determination date will be the arithmetic
mean of the rates, as of 3:00 p.m., New York City time, on
that interest determination date, for the last transaction
in overnight Federal Funds arranged by three leading brokers
of Federal Funds transactions in the City of New York
selected by the calculation agent.
If fewer than three brokers are quoting as mentioned, then
the rate of interest will be the same as that in effect on
that interest determination date.
Prime Rate Notes. Each Prime Rate note will bear interest at the rate
calculated using the Prime Rate and the spread and/or spread multiplier, if any,
specified in the applicable pricing supplement.
Unless the applicable pricing supplement specifies otherwise, 'Prime Rate'
means, with respect to an interest determination date, the rate set forth on
that date in H.15(519) under the heading 'Bank Prime Loan' or if not published
by 3:00 p.m., New York City time, on the calculation date, the rate on the
interest determination date as published in H.15 Daily Update, or another
recognized electronic source used for the purpose of displaying this rate, under
the heading 'Bank Prime Loan.'
If the rate cannot be set as described above, the calculation agent will use
the following methods in succession:
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If the rate is not published in H.15(519), H.15 Daily Update
or another recognized electronic source by 3:00 p.m., New
York City time, on the calculation date, then the Prime Rate
will be the arithmetic mean of the rates of interest that
appear on the Reuters Screen USPRIME 1 page as a bank's
publicly announced prime rate or base lending rate in effect
as of 3:00 p.m., New York City time, for that interest
determination date.
If fewer than four rates appear on the Reuters Screen
USPRIME 1 page on that date, then the Prime Rate will be the
arithmetic mean of the prime rates or base lending rates
quoted by three major banks in the City of New York selected
by the calculation agent on the basis of the actual number
of days in the year divided by a 360-day year as of the
close of business on the interest determination date.
If fewer than three banks are quoting as mentioned, then the
rate of interest will be the same as that in effect on the
interest determination date.
'Reuters Screen USPRIME 1 page' means the display page designated as page
'USPRIME 1' on the Reuters Monitor Money Rates Service (or such other page as
may replace the USPRIME 1 page on that service for the purpose of displaying
prime rates or base lending rates of major United States banks).
REDEMPTION AND REPAYMENT
Unless we otherwise provide in the applicable pricing supplement, a note
will not be redeemable or repayable prior to its stated maturity date.
If the applicable pricing supplement states that the note will be redeemable
at our option prior to its stated maturity date, then on such date or dates
specified in the pricing supplement, we may redeem those notes at our option
either in whole or from time to time in part, upon not less than 30 days'
written notice to the holder of those notes.
If the pricing supplement states that your note will be repayable at your
option prior to its stated maturity date, we will require receipt of notice of
the request for repayment at least 30 but not more than 60 days prior to the
date or dates specified in the pricing supplement. We also must receive the
completed form entitled 'Option to Elect Repayment.' Exercise of the repayment
option by the holder of a note is irrevocable.
Since the notes will be represented by a global note, DTC or its nominee
will be treated as the holder of the notes; therefore, other than the trustee
under the indenture, DTC or its nominee will be the only entity that receives
notices of redemption of notes from us, in the case of our redemption of notes,
and will be the only entity that can exercise the right to repayment of notes,
in the case of optional repayment. See 'Registration and Settlement' on page
S-25.
To ensure that DTC or its nominee will timely exercise a right to repayment
with respect to a particular beneficial interest in a note, the beneficial owner
of the interest in that note must instruct the broker or other direct or
indirect participant through which it holds the beneficial interest to notify
DTC or its nominee of its desire to exercise a right to repayment. Because
different firms have different cut-off times for accepting instructions from
their customers, each beneficial owner should consult the broker or other direct
or indirect participant through which it holds an interest in a note to
determine the cut-off time by which the instruction must be given for timely
notice to be delivered to DTC or its nominee. Conveyance of notices and other
communications by DTC or its nominee to participants, by participants to
indirect participants and by participants and indirect participants to
beneficial owners of the notes will be governed by agreements among them and any
applicable statutory or regulatory requirements.
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The redemption or repayment of a note normally will occur on the interest
payment date or dates following receipt of a valid notice. Unless otherwise
specified in the pricing supplement, the redemption or repayment price will
equal 100% of the principal amount of the note plus unpaid interest accrued to
the date or dates of redemption or repayment.
We may at any time purchase notes at any price or prices in the open market
or otherwise. We may also purchase notes otherwise tendered for repayment by a
holder or tendered by a holder's duly authorized representative through exercise
of the Survivor's Option described below. If we purchase the notes in this
manner, we have the discretion to either hold, resell or surrender the notes to
the trustee for cancellation.
SURVIVOR'S OPTION
The 'Survivor's Option' is a provision in a note pursuant to which we agree
to repay that note, if requested by the authorized representative of the
beneficial owner of that note, following the death of the beneficial owner of
the note, so long as the note was owned by that beneficial owner or the estate
of that beneficial owner at least six months prior to the request. The pricing
supplement relating to each offering of notes will state whether the Survivor's
Option applies to those notes.
If a note is entitled to a Survivor's Option, upon the valid exercise of the
Survivor's Option and the proper tender of that note for repayment, we will, at
our option, repay that note, in whole or in part, at a price equal to 100% of
the principal amount of the deceased beneficial owner's interest in that note
plus unpaid interest accrued to the date of repayment.
To be valid, the Survivor's Option must be exercised by or on behalf of the
person who has authority to act on behalf of the deceased beneficial owner of
the note (including, without limitation, the personal representative or executor
of the deceased beneficial owner or the surviving joint owner with the deceased
beneficial owner) under the laws of the applicable jurisdiction.
The death of a person holding a beneficial ownership interest in a note as a
joint tenant or tenant by the entirety with another person, or as a tenant in
common with the deceased holder's spouse, will be deemed the death of a
beneficial owner of that note, and the entire principal amount of the note so
held will be subject to repayment by us upon request. However, the death of a
person holding a beneficial ownership interest in a note as tenant in common
with a person other than such deceased holder's spouse will be deemed the death
of a beneficial owner only with respect to such deceased person's interest in
the note.
The death of a person who, during his or her lifetime, was entitled to
substantially all of the beneficial ownership interests in a note will be deemed
the death of the beneficial owner of that note for purposes of the Survivor's
Option, regardless of whether that beneficial owner was the registered holder of
that note, if entitlement to those interests can be established to the
satisfaction of us and the trustee. A beneficial ownership interest will be
deemed to exist in typical cases of nominee ownership, ownership under the
Uniform Transfers to Minors Act or Uniform Gifts to Minors Act, community
property or other joint ownership arrangements between a husband and wife. In
addition, a beneficial ownership interest will be deemed to exist in custodial
and trust arrangements where one person has all of the beneficial ownership
interests in the applicable note during his or her lifetime.
We have the discretionary right to limit the aggregate principal amount of
notes as to which exercises of the Survivor's Option shall be accepted by us
from authorized representatives of all deceased beneficial owners in any
calendar year to an amount equal to the greater of $2,000,000 or 2% of the
principal
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amount of all notes outstanding as of the end of the most recent calendar year.
We also have the discretionary right to limit to $250,000 in any calendar year
the aggregate principal amount of notes as to which exercises of the Survivor's
Option shall be accepted by us from the authorized representative of any
individual deceased beneficial owner of notes in such calendar year. In
addition, we will not permit the exercise of the Survivor's Option except in
principal amounts of $1,000 and multiples of $1,000.
An otherwise valid election to exercise the Survivor's Option may not be
withdrawn. Each election to exercise the Survivor's Option will be accepted in
the order that elections are received by the trustee, except for any note the
acceptance of which would contravene any of the limitations described in the
preceding paragraph. Notes accepted for repayment through the exercise of the
Survivor's Option normally will be repaid on the first interest payment date
that occurs 20 or more calendar days after the date of the acceptance. For
example, if the acceptance date of a note tendered through a valid exercise of
the Survivor's Option is May 1, 2003, and interest on that note is paid monthly,
we would normally, at our option, repay that note on the interest payment date
occurring on June 15, 2003, because the May 15, 2003 interest payment date would
occur less than 20 days from the date of acceptance. Each tendered note that is
not accepted in any calendar year due to the application of any of the
limitations described in the preceding paragraph will be deemed to be tendered
in the following calendar year in the order in which all such notes were
originally tendered. If a note tendered through a valid exercise of the
Survivor's Option is not accepted, the trustee will deliver a notice by
first-class mail to the registered holder, at that holder's last known address
as indicated in the note register, that states the reason that note has not been
accepted for repayment.
With respect to notes represented by a global note, DTC or its nominee is
treated as the holder of the notes and will be the only entity that can exercise
the Survivor's Option for such notes. To obtain repayment pursuant to exercise
of the Survivor's Option for a note, the deceased beneficial owner's authorized
representative must provide the following items to the broker or other entity
through which the beneficial interest in the note is held by the deceased
beneficial owner:
a written instruction to such broker or other entity to
notify DTC of the authorized representative's desire to
obtain repayment pursuant to exercise of the Survivor's
Option;
appropriate evidence satisfactory to us and the trustee (a)
that the deceased was the beneficial owner of the note at
the time of death and his or her interest in the note was
owned by the deceased beneficial owner or his or her estate
at least six months prior to the request for repayment,
(b) that the death of the beneficial owner has occurred,
(c) of the date of death of the beneficial owner, and
(d) that the representative has authority to act on behalf
of the beneficial owner;
if the interest in the note is held by a nominee of the
deceased beneficial owner, a certificate satisfactory to us
and the trustee from the nominee attesting to the deceased's
beneficial ownership of such note;
a written request for repayment signed by the authorized
representative of the deceased beneficial owner with the
signature guaranteed by a member firm of a registered
national securities exchange or of the National Association
of Securities Dealers, Inc. or a commercial bank or trust
company having an office or correspondent in the United
States;
if applicable, a properly executed assignment or
endorsement;
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tax waivers and any other instruments or documents that we
or the trustee reasonably require in order to establish the
validity of the beneficial ownership of the note and the
claimant's entitlement to payment; and
any additional information we or the trustee reasonably
require to evidence satisfaction of any conditions to the
exercise of the Survivor's Option or to document beneficial
ownership or authority to make the election and to cause the
repayment of the note.
In turn, the broker or other entity will deliver each of these items to the
trustee, together with evidence satisfactory to us and the trustee from the
broker or other entity stating that it represents the deceased beneficial owner.
We retain the right to limit the aggregate principal amount of notes as to
which exercises of the Survivor's Option applicable to the notes will be
accepted in any one calendar year as described above. All questions regarding
the eligibility or validity of any exercise of the Survivor's Option will be
determined by us, in our sole discretion, which determination will be final and
binding on all parties.
The broker or other entity will be responsible for disbursing payments
received from the trustee to the authorized representative. See 'Registration
and Settlement' on page S-25.
Forms for the exercise of the Survivor's Option may be obtained from the
trustee at Bank One Trust Company, N.A., 1 Bank One Plaza, Chicago, Illinois,
60670, Attention: Corporate Trust.
If applicable, we will comply with the requirements of Section 14(e) of the
Exchange Act, and the rules promulgated thereunder, and any other securities
laws or regulations in connection with any repayment of notes at the option
ofthe registered holders or beneficial owners thereof.
MEETING OF NOTEHOLDERS
The indenture contains provisions (which shall have effect as if
incorporated in the notes) for calling meetings of the holders of the notes and
other debt securities issued pursuant to the indenture to consider matters
affecting their interests, including, without limitation, the modification of
the terms of the notes or the waiver of any default under the terms of the notes
or the indenture. CIT or the holders of at least 10% in aggregate principal
amount of the notes then outstanding of any series or all series may request
that the trustee call a meeting of the holders of the notes of that series or
all series, respectively. The quorum for any meeting of the holders of the notes
is the presence of the holders of notes who are entitled to vote in aggregate
principal amount sufficient to take action upon the business for which such
meeting was called. A resolution passed at a duly called and constituted meeting
of debt securityholders will be binding on the holders of all debt securities
issued pursuant to the indenture, whether or not they are present at the
meeting.
REPLACEMENT OF NOTES
If any mutilated note is surrendered to the trustee, we will execute and the
trustee will authenticate and deliver in exchange for such mutilated note a new
note of the same series and principal amount. If the trustee and we receive
evidence to our satisfaction of the destruction, loss or theft of any note and
such security or indemnity as may be required by them, then we shall execute and
the trustee shall authenticate and deliver, in lieu of such destroyed, lost or
stolen note, a new note of the same series and principal amount. All expenses
(including counsel fees and expenses) associated with issuing the new note shall
be borne by the owner of the mutilated, destroyed, lost or stolen note.
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REOPENING OF ISSUE
We may, from time to time, without the consent of existing noteholders,
reopen an issue of notes and issue additional notes with the same terms
(including maturity and interest payment terms) as notes issued on an earlier
date, except for the issue date, issue price and the first payment of interest.
After such additional notes are issued, they will be fungible with the
previously issued notes to the extent specified in the applicable pricing
supplement.
REGISTRATION AND SETTLEMENT
THE DEPOSITORY TRUST COMPANY
All of the notes we offer will be issued in book-entry only form. This means
that we will not issue certificates for notes, except in the limited cases
described below. Instead, we will issue global notes in registered form. Each
global note will be held through DTC and will be registered in the name of Cede
& Co., as nominee of DTC. Accordingly, Cede & Co. will be the holder of record
of the notes. Each note represented by a global note evidences a beneficial
interest in that global note.
Beneficial interests in a global note will be shown on, and transfers are
effected through, records maintained by DTC or its participants. In order to own
a beneficial interest in a note, you must be an institution that has an account
with DTC or have a direct or indirect account with such an institution.
Transfers of ownership interests in the notes will be accomplished by making
entries in DTC participants' books acting on behalf of beneficial owners.
So long as DTC or its nominee is the registered holder of a global note, DTC
or its nominee, as the case may be, will be the sole holder and owner of the
notes represented thereby for all purposes, including payment of principal and
interest, under the indenture. Except as otherwise provided below, you will not
be entitled to receive physical delivery of certificated notes and will not be
considered the holder of the notes for any purpose under the indenture.
Accordingly, you must rely on the procedures of DTC and the procedures of the
DTC participant through which you own your note in order to exercise any rights
of a holder of a note under the indenture. The laws of some jurisdictions
require that certain purchasers of notes take physical delivery of such notes in
certificated form. Those limits and laws may impair the ability to transfer
beneficial interests in the notes.
Each global note representing notes will be exchangeable for certificated
notes of like tenor and terms and of differing authorized denominations in a
like aggregate principal amount, only if (1) DTC notifies us that it is
unwilling or unable to continue as depositary for the global notes or we become
aware that DTC has ceased to be a clearing agency registered under the Exchange
Act and, in any such case we fail to appoint a successor to DTC within 60
calendar days, (2) we, in our sole discretion, determine that the global notes
shall be exchangeable for certificated notes or (3) an event of default has
occurred and is continuing with respect to the notes under the indenture. Upon
any such exchange, the certificated notes shall be registered in the names of
the beneficial owners of the global note representing the notes.
The following is based on information furnished by DTC:
DTC will act as securities depositary for the notes. The notes will be
issued as fully-registered notes registered in the name of Cede & Co. (DTC's
partnership nominee) or such other name as may be requested by an authorized
representative of DTC. Generally, one fully registered global note will be
issued for all of the principal amount of the notes. If, however, the aggregate
principal amount of the notes exceeds $500,000,000, one certificate will be
issued with respect to each $500,000,000 of principal
S-25
amount, and an additional certificate will be issued with respect to any
remaining principal amount of such note.
DTC, the world's largest depositary, 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 Exchange Act. DTC holds and provides asset servicing for over
2 million issues of U.S. and non-U.S. equity issues, corporate and municipal
debt issues and money market instruments from 85 countries that DTC's direct
participants deposit with DTC.
DTC also facilitates the post-trade settlement among direct participants of
sales and other securities transactions in deposited securities through
electronic computerized book-entry transfers and pledges between direct
participants' accounts. This eliminates the need for physical movement of
securities certificates. Direct participants include both U.S. and non-U.S.
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. DTC is a wholly-owned subsidiary of The
Depository Trust & Clearing Corporation ('DTCC'). DTCC, in turn, is owned by a
number of direct participants of DTC and members of the National Securities
Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing
Corporation, and Emerging Markets Clearing Corporation, as well as by The New
York Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as both U.S. and non-U.S. securities brokers and
dealers, banks, trust companies and clearing corporations that clear through or
maintain a custodial relationship with a direct participant, either directly or
indirectly. DTC has Standard & Poor's highest rating: AAA. The DTC rules
applicable to its participants are on file with the SEC. More information about
DTC can be found at www.dtcc.com.
Purchases of the notes under the DTC system must be made by or through
direct participants, which will receive a credit for the notes on DTC's records.
The beneficial interest of each actual purchaser of each note is in turn to be
recorded on the direct and indirect participants' records. Beneficial owners
will not receive written confirmation from DTC of their purchase. Beneficial
owners are, however, expected to receive written confirmations providing details
of the transaction, as well as periodic statements of their holdings, from the
direct or indirect participant through which the beneficial owner entered into
the transaction. Transfers of beneficial interests in the notes are to be
accomplished by entries made on the books of direct and indirect participants
acting on behalf of beneficial owners. Beneficial owners will not receive
certificates representing their beneficial interests in notes, except in the
event that use of the book-entry system for the notes is discontinued.
To facilitate subsequent transfers, all notes deposited by direct
participants with DTC will be registered in the name of DTC's partnership
nominee, Cede & Co. or such other name as may be requested by an authorized
representative of DTC. The deposit of the notes with DTC and their registration
in the name of Cede & Co. or such other nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual beneficial owners of
the notes; DTC's records reflect only the identity of the direct participants to
whose accounts such notes will be credited, which may or may not be the
beneficial owners. The direct and indirect participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to 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
S-26
effect from time to time. Beneficial owners of the notes may wish to take
certain steps to augment the transmission to them of notices of significant
events with respect to the notes, such as redemption, tenders, defaults, and
proposed amendments to the security documents. For example, beneficial owners of
the notes may wish to ascertain that the nominee holding the notes for their
benefit has agreed to obtain and transmit notices to beneficial owners. In the
alternative, beneficial owners may wish to provide their names and addresses to
the registrar of the notes and request that copies of the notices be provided to
them directly. Any such request may or may not be successful.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote
with respect to the notes unless authorized by a direct participant in
accordance with DTC's procedures. Under its usual procedures, DTC mails an
Omnibus Proxy to us as soon as possible after the regular record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those direct
participants to whose accounts the notes are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
We will pay principal and or interest payments on the notes in same-day
funds directly to Cede & Co., or such other nominee as may be requested by an
authorized representative of DTC. DTC's practice is to credit direct
participants' accounts on the applicable payment date in accordance with their
respective holdings shown on DTC's records upon DTC's receipt of funds and
corresponding detail information. Payments by participants to beneficial owners
will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in 'street name,' and will be the responsibility of these
participants and not of DTC or any other party, subject to any statutory or
regulatory requirements that may be in effect from time to time. Payment of
principal and interest to Cede & Co., or such other nominee as may be requested
by an authorized representative of DTC, is our responsibility, 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
the direct or indirect participant.
We will send any redemption notices to DTC. If less than all of the notes
are being redeemed, DTC's practice is to determine by lot the amount of the
interest of each direct participant in such issue to be redeemed.
A beneficial owner, or its authorized representative, shall give notice to
elect to have its notes repaid by us, through its direct or indirect
participant, to the trustee, and shall effect delivery of such notes by causing
the direct participant to transfer that participant's interest in the global
note representing such notes, on DTC's records, to the trustee. The requirement
for physical delivery of notes in connection with a demand for repayment will be
deemed satisfied when the ownership rights in the global note representing such
notes are transferred by the direct participants on DTC's records.
DTC may discontinue providing its services as securities depository for the
notes at any time by giving us reasonable notice. Under such circumstances, if a
successor securities depositary is not obtained, we will print and deliver
certificated notes. We may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event, we
will print and deliver certificated notes.
The information in this section concerning DTC and DTC's system has been
obtained from sources that we believe to be reliable, but neither we, the
Purchasing Agent nor any agent takes any responsibility for its accuracy.
S-27
REGISTRATION, TRANSFER AND PAYMENT OF CERTIFICATED NOTES
We do not intend to issue certificated notes. If we ever issue notes in
certificated form, those notes may be presented for registration, transfer and
payment at the office of the registrar or at the office of any transfer agent
designated and maintained by us. We have originally designated Bank One Trust
Company, N.A. to act in those capacities for the notes. The registrar or
transfer agent will make the transfer or registration only if it is satisfied
with the documents of title and identity of the person making the request. There
will not be a service charge for any exchange or registration of transfer of the
notes, but we may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with the exchange. At any
time, we may change transfer agents or approve a change in the location through
which any transfer agent acts. We also may designate additional transfer agents
for any notes at any time.
We will not be required to: (1) issue, exchange or register the transfer of
any note to be redeemed for a period of 15 days after the selection of the notes
to be redeemed; (2) exchange or register the transfer of any note that was
selected, called or is being called for redemption, except the unredeemed
portion of any note being redeemed in part; or (3) exchange or register the
transfer of any note as to which an election for repayment by the holder has
been made, except the unrepaid portion of any note being repaid in part.
We will pay principal of and interest on any certificated notes at the
offices of the paying agents we may designate from time to time. Generally, we
will pay interest on a note by check on any interest payment date other than at
stated maturity or upon earlier redemption or repayment to the person in whose
name the note is registered at the close of business on the regular record date
for that payment. We will pay principal and interest at stated maturity or upon
earlier redemption or repayment in same-day funds against presentation and
surrender of the applicable notes.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain material U.S. Federal income tax
consequences of the purchase, ownership and disposition of the notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding notes as a hedge against currency
risks or as a position in a 'straddle' for tax purposes, persons whose
functional currency is not the U.S. dollar, or persons who are not U.S. Holders.
It also does not deal with holders other than original purchasers (except where
otherwise specifically noted). Persons considering the purchase of the notes
should consult their own tax advisors concerning the application of U.S. Federal
income tax laws to their particular situations as well as any consequences of
the purchase, ownership and disposition of the notes arising under the laws of
any other taxing jurisdiction.
As used herein, the term 'U.S. Holder' means a beneficial owner of a note
that is for U.S. Federal income tax purposes (1) a citizen or resident of the
United States, (2) a corporation or partnership (including an entity treated as
a corporation or partnership for U.S. Federal income tax purposes) created or
organized in or under the laws of the United States, any state thereof or the
District of Columbia (other than a partnership that is not treated as a U.S.
person under any applicable Treasury regulations), (3) an estate whose income is
subject to U.S. federal income tax regardless of its source, (4) a trust if a
court within the U.S. is able to exercise primary supervision over the
administration of the trust and one
S-28
or more U.S. persons have the authority to control all substantial decisions of
the trust or (5) any other person whose income or gain in respect of a note is
effectively connected with the conduct of a U.S. trade or business.
Notwithstanding the preceding clause (4), to the extent provided in regulations,
certain trusts in existence on August 20, 1996 and treated as U.S. persons prior
to such date that elect to continue to be so treated also shall be considered
U.S. Holders.
PAYMENTS OF INTEREST
Payments of interest on a note generally will be taxable to a U.S. Holder as
ordinary income at the time such payments are accrued or are received (in
accordance with the U.S. Holder's regular method of tax accounting).
ORIGINAL ISSUE DISCOUNT
The following summary is a general discussion of the material U.S. Federal
income tax consequences to U.S. Holders of the purchase, ownership and
disposition of notes issued with original issue discount ('original issue
discount notes'). The following summary is based upon Treasury regulations (the
'OID Regulations') released by the Internal Revenue Service ('IRS') under the
original issue discount provisions of the Internal Revenue Code of 1986, as
amended (the 'Code').
For U.S. Federal income tax purposes, original issue discount is the excess
of the stated redemption price at the stated maturity of a note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of 1%
of the note's stated redemption price at maturity multiplied by the number of
complete years to its stated maturity from its issue date or, in the case of a
note providing for the payment of any amount other than qualified stated
interest (as defined below) prior to stated maturity, multiplied by the weighted
average maturity of such note). The issue price of each note in an issue of
notes equals the first price at which a substantial amount of such notes has
been sold (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The stated redemption price at maturity of a note is the sum of
all payments provided by the note other than 'qualified stated interest'
payments. The term 'qualified stated interest' generally means stated interest
that is unconditionally payable in cash or property (other than debt instruments
of the issuer) at least annually at a single fixed rate or, generally, at a rate
(a 'Variable Rate') that varies among payment periods:
if that rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed
funds or
that is based upon the changes in the yield or price of
certain actively traded personal property.
In addition, under the OID Regulations, if a note bears interest for one or more
accrual periods at a rate below the rate applicable for the remaining term of
such note (e.g., notes with teaser rates or interest holidays), and if the
greater of either the resulting foregone interest on such note or any 'true'
discount on such note (i.e., the excess of the note's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then all
or a portion of the stated interest on the note would be treated as original
issue discount rather than qualified stated interest. In cases where notes that
bear interest from a non-tax standpoint are deemed instead to be original issue
discount notes for U.S. Federal income tax purposes, the OID Regulations provide
rules for determining whether payments pursuant to a note with a Variable Rate
will be treated as payments of qualified stated interest. The pricing supplement
for any series of notes will specify whether they are original issue discount
notes and, in the case of notes with a
S-29
Variable Rate, will describe the applicable rules for inclusion of original
issue discount in income of a U.S. Holder.
Payments of qualified stated interest on a note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of an original issue discount note having a maturity
upon issuance of more than one year must include original issue discount in
income as ordinary interest for U.S. Federal income tax purposes as it accrues
under a constant yield method in advance of receipt of the cash payments
attributable to such income, regardless of such U.S. Holder's regular method of
tax accounting. In general, the amount of original issue discount included in
income by the initial U.S. Holder of an original issue discount note is the sum
of the daily portions of original issue discount with respect to such original
issue discount note for each day during the taxable year (or portion of the
taxable year) on which such U.S. Holder held such original issue discount note.
The 'daily portion' of original issue discount on any original issue discount
note is determined by allocating to each day in any accrual period a ratable
portion of the original issue discount allocable to that accrual period. An
'accrual period' may be of any length and the accrual periods may vary in length
over the term of the original issue discount note, provided that each accrual
period is no longer than one year and each scheduled payment of principal or
interest occurs either on the final day of an accrual period or on the first day
of an accrual period. The amount of original issue discount allocable to each
accrual period is generally equal to the difference between (1) the product of
the original issue discount note's adjusted issue price at the beginning of such
accrual period and its yield to maturity (determined on the basis of compounding
at the close of each accrual period and appropriately adjusted to take into
account the length of the particular accrual period) and (2) the amount of any
qualified stated interest payments allocable to such accrual period. The
'adjusted issue price' of an original issue discount note at the beginning of
any accrual period is the sum of the issue price of the original issue discount
note plus the amount of original issue discount allocable to all prior accrual
periods minus the amount of any prior payments on the original issue discount
note that were not qualified stated interest payments. Under these rules, U.S.
Holders generally will have to include in income increasingly greater amounts of
original issue discount in successive accrual periods.
A U.S. Holder who purchases an original issue discount note for an amount
that is greater than its adjusted issue price as of the purchase date and less
than or equal to the sum of all amounts payable on the original issue discount
note after the purchase date other than payments of qualified stated interest,
will be considered to have purchased the original issue discount note at an
'acquisition premium.' Under the acquisition premium rules, the amount of
original issue discount which such U.S. Holder must include in its gross income
with respect to such original issue discount note for any taxable year (or
portion thereof in which the U.S. Holder holds the original issue discount note)
will be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
Certain of the notes (1) may be redeemable at our option prior to their
stated maturity (a 'call option') and/or (2) may be repayable at the option of
the holder prior to their stated maturity (a 'put option'). Notes containing
such features (including the Survivor's Option) may be subject to rules that
differ from the general rules discussed above. Investors intending to purchase
notes with such features should consult their own tax advisors, since the
original issue discount consequences will depend, in part, on the particular
terms and features of the purchased notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount,
de minimis original issue discount, market discount,
S-30
de minimis market discount, and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium) that accrues on a debt
instrument by using the constant yield method applicable to original issue
discount, subject to certain limitations and exceptions. U.S. Holders should
consult with their own tax advisors about this election.
SHORT-TERM NOTES
Notes that have a fixed maturity of one year or less ('short-term notes')
will be treated as having been issued with original issue discount. In general,
an individual or other cash method U.S. Holder is not required to include
accrued original issue discount with respect to a short-term note in such U.S.
Holder's income currently unless the U.S. Holder elects to do so. If such an
election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the short-term note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or upon
election under the constant yield method (based on daily compounding), through
the date of sale or stated maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
short-term note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for U.S. Federal income tax purposes
under the accrual method, and certain other holders including banks and dealers
in securities, are required to accrue original issue discount on a short-term
note on a straight-line basis unless an election is made to accrue the original
issue discount under a constant yield method (based on daily compounding).
MARKET DISCOUNT
If a U.S. Holder purchases a note, other than an original issue discount
note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of an original issue discount note, for an amount that is less than its adjusted
issue price as of the purchase date, such U.S. Holder will be treated as having
purchased such note at a 'market discount,' unless such market discount is less
than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of an original issue discount note,
any payment that does not constitute qualified stated interest) on, or any gain
realized on the sale, exchange, retirement or other disposition of, a note as
ordinary income to the extent of the lesser of (1) the amount of such payment or
realized gain or (2) the market discount which has not previously been included
in income and is treated as having accrued on such note at the time of such
payment or disposition. Market discount will be considered to accrue ratably
during the period from the date of acquisition to the stated maturity date of
the note, unless the U.S. Holder elects to accrue market discount on the
constant interest method.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a note with market discount until the stated maturity of the
note or certain earlier dispositions, because a current deduction is only
allowed to the extent the interest expense exceeds an allocable portion of
market discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or constant interest basis), in
which case the rules described above regarding the treatment as ordinary income
of gain upon the disposition of the note and upon the receipt of certain cash
payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for U.S. Federal income tax purposes. Such an election will apply to
all debt instruments acquired
S-31
by the U.S. Holder on or after the first day of the first taxable year to which
such election applies and may be revoked only with the consent of the IRS.
PREMIUM
If a U.S. Holder purchases a note for an amount that is greater than the sum
of all amounts payable on the note after the purchase date other than payments
of qualified stated interest, such U.S. Holder will be considered to have
purchased the note with 'amortizable bond premium' equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the note and may offset interest otherwise
required to be included in respect of the note during any taxable year by the
amortized amount of such excess for the taxable year. However, if the note may
be optionally redeemed after the U.S. Holder acquires it at a price in excess of
its stated redemption price at maturity, special rules would apply which could
result in a deferral of the amortization of some bond premium until later in the
term of the note. Any election to amortize bond premium applies to all taxable
debt instruments held by the U.S. Holder on or after the first day of the first
taxable year to which such election applies and may be revoked only with the
consent of the IRS.
DISPOSITION OF A NOTE
Upon the sale, exchange or retirement of a note, a U.S. Holder generally
will recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement (other than amounts representing
accrued and unpaid interest) and such U.S. Holder's adjusted tax basis in the
note. A U.S. Holder's adjusted tax basis in a note generally will equal such
U.S. Holder's initial investment in the note increased by any original issue
discount included in income (and accrued market discount, if any, if the U.S.
Holder has included such market discount in income) and decreased by the amount
of any payments, other than qualified stated interest payments, received and
amortizable bond premium taken with respect to such note. Such gain or loss
generally will be long-term capital gain or loss if the note was held for more
than one year. Non-corporate taxpayers are subject to reduced maximum rates on
long-term capital gains and are generally subject to tax at ordinary income
rates on short-term capital gains. The deductibility of capital losses is
subject to certain limitations. Prospective investors should consult their own
tax advisors concerning these tax law provisions.
If a U.S. Holder disposes of only a portion of a note pursuant to a
redemption or repayment (including the Survivor's Option, if applicable), such
disposition may be treated as a pro rata prepayment in retirement of a portion
of a debt instrument. Generally, the resulting gain or loss would be calculated
by assuming that the original note being tendered consists of two instruments,
one that is retired (or repaid), and one that remains outstanding. The adjusted
issue price and the U.S. Holder's adjusted basis, determined immediately before
the pro rata prepayment, would be allocated between these two instruments based
on the portion of the instrument that is treated as retired by the pro rata
prepayment.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding of U.S. Federal income tax at the applicable rate may
apply to payments of principal, premium and interest on a note, and to payments
of proceeds of the sale or redemption of a note, to registered owners who are
not 'exempt recipients' and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally
S-32
are exempt recipients. The backup withholding rate is 30% (subject to periodic
reductions through 2006). Payments made in respect of the notes to a U.S. Holder
must be reported to the IRS, unless the U.S. Holder is an exempt recipient or
establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a
credit against the U.S. Holder's U.S. Federal income tax liability and may
entitle the U.S. Holder to a refund, provided that the required information is
furnished to the IRS.
EMPLOYEE RETIREMENT INCOME SECURITY ACT
A fiduciary of a pension plan or other employee benefit plan (including a
governmental plan, an individual retirement account or a Keogh plan) proposing
to invest in the notes should consider this section carefully.
A fiduciary of an employee benefit plan subject to the Employee Retirement
Income Security Act of 1974, as amended (commonly referred to as 'ERISA') should
consider the fiduciary standards under ERISA in the context of the particular
circumstances of such plan before authorizing an investment in the notes. Such
fiduciary should consider whether the investment is in accordance with the
documents and instruments governing the plan.
In addition, ERISA and the Code prohibit certain transactions (referred to
as 'prohibited transactions') involving the assets of a plan subject to ERISA or
the assets of an individual retirement account or plan subject to Section 4975
of the Code (referred to as an 'ERISA plan'), on the one hand, and persons who
have certain specified relationships to such plan ('parties in interest' within
the meaning of ERISA or 'disqualified persons' within the meaning of the Code),
on the other. If we (or an affiliate) are considered a party in interest or
disqualified person with respect to an ERISA plan, then the investment in notes
by the ERISA plan may give rise to a prohibited transaction.
By purchasing and holding the notes, the person making the decision to
invest on behalf of an ERISA plan is representing that the purchase and holding
of the notes will not result in a prohibited transaction under ERISA or the
Code. Therefore, an ERISA plan should not invest in the notes unless the plan
fiduciary or other person acquiring securities on behalf of the ERISA plan
determines that neither we nor an affiliate is a party in interest or a
disqualified person or, alternatively, that an exemption from the prohibited
transaction rules is available. If an ERISA plan engages in a prohibited
transaction, the transaction may require 'correction' and may cause the ERISA
plan fiduciary to incur certain liabilities and the parties in interest or
disqualified persons to be subject to excise taxes.
If you are the fiduciary of an employee benefit plan or other ERISA plan, or
an insurance company that is providing investment advice or other features to an
employee benefit plan or other ERISA plan, and you propose to invest in the
notes with the assets of the ERISA plan, you should consult your own legal
counsel for further guidance.
PLAN OF DISTRIBUTION
Under the terms of the selling agent agreement, the notes will be offered
from time to time by us to the Purchasing Agent for subsequent resale to the
agents and other dealers who are broker-dealers and securities firms. The
agents, including the Purchasing Agent, are parties to the selling agent
agreement. The notes will be offered for sale in the United States only. Dealers
who are members of the selling group have executed a master selected dealer
agreement with the Purchasing Agent. We also may appoint additional agents to
sell the notes. Any sale of the notes through those additional agents, however,
will be
S-33
on the same terms and conditions to which the original agents have agreed. The
Purchasing Agent will purchase the notes at a discount ranging from 0.2% to 3.0%
of the non-discounted price for each note sold. However, we also may sell the
notes to the Purchasing Agent at a discount greater than or less than the range
specified above. The discount at which we sell the notes to the Purchasing Agent
will be set forth in the applicable pricing supplement. The Purchasing Agent
also may sell notes to dealers at a concession not in excess of the discount it
received from us. In certain cases, the Purchasing Agent and the other agents
and dealers may agree that the Purchasing Agent will retain the entire discount.
We will disclose any particular arrangements in the applicable pricing
supplement.
Following the solicitation of orders, each of the agents, severally and not
jointly, may purchase notes as principal for its own account from the Purchasing
Agent. Unless otherwise set forth in the applicable pricing supplement, these
notes will be purchased by the agents and resold by them to one or more
investors at a fixed public offering price. After the initial public offering of
notes, the public offering price (in the case of notes to be resold at a fixed
public offering price), discount and concession may be changed.
We have the sole right to accept offers to purchase notes and may reject any
proposed offer to purchase notes in whole or in part. Each agent also has the
right, in its discretion reasonably exercised, to reject any proposed offer to
purchase notes in whole or in part. We reserve the right to withdraw, cancel or
modify any offer without notice. We also may change the terms, including the
interest rate we will pay on the notes, at any time prior to our acceptance of
an offer to purchase.
Each agent, including the Purchasing Agent, may be deemed to be an
'underwriter' within the meaning of the Securities Act of 1933, as amended (the
'Securities Act'). We have agreed to indemnify the agents against certain
liabilities, including liabilities under the Securities Act, or to contribute to
any payments they may be required to make in respect of such liabilities. We
also have agreed to reimburse the agents for certain expenses.
No note will have an established trading market when issued. We do not
intend to apply for the listing of the notes on any securities exchange.
However, we have been advised by the agents that they may purchase and sell
notes in the secondary market as permitted by applicable laws and regulations.
The agents are not obligated to make a market in the notes, and they may
discontinue making a market in the notes at any time without notice. Neither we
nor the agents can provide any assurance regarding the development, liquidity or
maintenance of any trading market for any notes. All secondary trading in the
notes will settle in same-day funds. See 'Registration and Settlement' on page
S-25.
In connection with certain offerings of notes, the rules of the SEC permit
the Purchasing Agent to engage in transactions that may stabilize the price of
the notes. The Purchasing Agent will conduct these activities for the agents.
These transactions may consist of short sales, stabilizing transactions and
purchases to cover positions created by short sales. A short sale is the sale by
the Purchasing Agent of a greater amount of notes than the amount the Purchasing
Agent has agreed to purchase in connection with a specific offering of notes.
Stabilizing transactions consist of certain bids or purchases made by the
Purchasing Agent to prevent or retard a decline in the price of the notes while
an offering of notes is in process. In general, these purchases or bids for the
notes for the purpose of stabilization or to reduce a syndicate short position
could cause the price of the notes to be higher than it might otherwise be in
the absence of those purchases or bids. Neither we nor the Purchasing Agent
makes any representation or prediction as to the direction or magnitude of any
effect that these transactions may have on the price of any notes. In addition,
neither we nor the Purchasing Agent makes any representation that, once
S-34
commenced, these transactions will not be discontinued without notice. The
Purchasing Agent is not required to engage in these activities and may end any
of these activities at any time.
The agents or dealers to or through which we may sell notes may engage in
transactions with us and perform services for us in the ordinary course of
business.
LEGAL MATTERS
The validity of the notes offered will be passed upon for us by Schulte Roth
& Zabel LLP, New York, New York. Certain legal matters in connection with the
notes will be passed upon for the agents by Wilmer, Cutler & Pickering,
Washington, D.C.
EXPERTS
The consolidated balance sheets of CIT Group Inc. and its subsidiaries as of
December 31, 2002, September 30, 2002 and September 30, 2001 and the related
consolidated statements of income, stockholders' equity and cash flows for the
three months ended December 31, 2002, the year ended September 30, 2002, the
period from June 2, 2001 through September 30, 2001 and the period from January
1, 2001 through June 1, 2001, incorporated by reference herein and in the
registration statement of which this prospectus supplement and the accompanying
prospectus form a part, have been so incorporated by reference in reliance on
the reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated statements of income, changes in shareholders' equity and
cash flows of The CIT Group, Inc. and subsidiaries for the year ended December
31, 2000, have been incorporated by reference herein and in the registration
statement of which this prospectus supplement and the accompanying prospectus
form a part, in reliance on the report of KPMG LLP, independent accountants,
also incorporated by reference herein, and upon the authority of KPMG LLP as
experts in accounting and auditing.
OTHER GENERAL INFORMATION
The notes, the indenture, and the selling agent agreement are governed by,
and are to be construed in accordance with, the laws of the State of New York
and of the United States, applicable to agreements made and to be performed
wholly within those jurisdictions.
This prospectus supplement and the prospectus may be used only for the
purposes for which they were published. This prospectus supplement and the
prospectus together represent an offer to sell the notes but only under
circumstances and in jurisdictions where it is lawful to do so.
We will identify in the applicable pricing supplement whether the notes have
been accepted for clearance through the DTC. The CUSIP or the identification
number for any other relevant clearing system for each series of notes will be
set out in the relevant pricing supplement.
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[THIS PAGE INTENTIONALLY LEFT BLANK]
PROSPECTUS
[CIT LOGO]
CIT GROUP INC.
DEBT SECURITIES
-------------------
We may issue up to an aggregate of $17,083,787,000 of debt securities in one
or more series with the same or different terms.
When we offer specific debt securities, we will disclose the terms of those
debt securities in a prospectus supplement that accompanies this prospectus. The
prospectus supplement may also add, update and modify information contained or
incorporated by reference in this prospectus. BEFORE YOU MAKE YOUR INVESTMENT
DECISION, WE URGE YOU TO CAREFULLY READ THIS PROSPECTUS AND THE PROSPECTUS
SUPPLEMENT DESCRIBING THE SPECIFIC TERMS OF ANY OFFERING, TOGETHER WITH
ADDITIONAL INFORMATION DESCRIBED UNDER THE HEADING 'WHERE YOU CAN FIND MORE
INFORMATION.'
These debt securities may be either senior or senior subordinated in
priority of payment and will be direct unsecured obligations.
The terms of any debt securities offered to the public will depend on market
conditions at the time of sale. We reserve the sole right to accept or reject,
in whole or in part, any proposed purchase of the debt securities that we offer.
-------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF OFFERED SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
THE DATE OF THIS PROSPECTUS IS MAY 9, 2003
TABLE OF CONTENTS
PAGE
----
CIT GROUP INC. ............................................. 3
RATIOS OF EARNINGS TO FIXED CHARGES......................... 9
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 10
USE OF PROCEEDS............................................. 10
DESCRIPTION OF DEBT SECURITIES.............................. 11
PLAN OF DISTRIBUTION........................................ 16
EXPERTS..................................................... 17
LEGAL OPINIONS.............................................. 17
WHERE YOU CAN FIND MORE INFORMATION......................... 17
2
CIT GROUP INC.
GENERAL
CIT is a leading global commercial and consumer finance company that was
founded in 1908. We are a source of financing and leasing capital for companies
in a wide variety of industries, including many of today's leading industries
and emerging businesses, offering vendor, equipment, commercial, factoring,
consumer, and structured financing capabilities.
On July 8, 2002, our former parent, Tyco International Ltd. ('Tyco'),
completed a sale of 100% of CIT's outstanding common stock in an initial public
offering. Immediately prior to the offering, a restructuring was effectuated
whereby our predecessor, CIT Group Inc., a Nevada corporation (which is referred
to in this prospectus as CIT Group Inc. (Nevada)), was merged with and into its
parent Tyco Capital Holding, Inc. ('TCH'), a Nevada corporation, and that
combined entity was further merged with and into CIT Group Inc. (Del), a
Delaware corporation. In connection with the reorganization, CIT Group Inc.
(Del) was renamed CIT Group Inc. As a result of the reorganization, CIT is the
successor to CIT Group Inc. (Nevada)'s business, operations, obligations and SEC
registration.
On June 1, 2001, The CIT Group, Inc., a predecessor of CIT, was acquired by
TCH, a wholly-owned subsidiary of Tyco, in a purchase business combination
recorded under the 'push-down' method of accounting, resulting in a new basis of
accounting for the 'successor' periods beginning June 2, 2001. Information
relating to all 'predecessor' periods prior to the acquisition is presented
using CIT's historical basis of accounting.
Following the acquisition by Tyco, we changed our fiscal year end from
December 31 to September 30 to conform to Tyco's. On November 5, 2002, our board
of directors approved returning to a calendar year end for financial reporting.
We have a broad array of 'franchise' businesses that focus on specific
industries, asset types and markets, which are balanced by client, industry and
geographic diversification. Managed assets were $46.4 billion, owned financing
and leasing assets were $35.9 billion and stockholders' equity was $4.9 billion
at December 31, 2002.
We provide a wide range of financing and leasing products to small, midsize
and larger companies across a wide variety of industries, including
manufacturing, retailing, transportation, aerospace, construction, technology,
communication and various service-related industries. The secured lending,
leasing and factoring products of our operations include direct loans and
leases, operating leases, leveraged and single investor leases, secured
revolving lines of credit and term loans, credit protection, accounts receivable
collection, import and export financing, debtor-in-possession and turnaround
financing, and acquisition and expansion financing. Consumer lending is
conducted in our Specialty Finance segment and consists primarily of home equity
lending to consumers originated largely through a network of brokers and
correspondents.
Transactions are generated through direct calling efforts with borrowers,
lessees, equipment end-users, vendors, manufacturers and distributors and
through referral sources and other intermediaries. In addition, our strategic
business units jointly structure certain transactions and refer transactions to
other CIT units to best meet our customers' overall financing needs. We also buy
and sell participations in and syndications of finance receivables and/or lines
of credit. From time to time, in the normal course of business, we purchase
finance receivables on a wholesale basis to supplement our originated finance
receivables and sell select finance receivables and equipment under operating
leases for risk and other balance sheet management purposes, or to improve
profitability.
We conduct our operations through strategic business units that market
products and services to satisfy the financing needs of specific customers,
industries, vendors/manufacturers, and markets. Our four business segments are
as follows:
Equipment Financing and Leasing
Specialty Finance
Commercial Finance
Structured Finance
3
EQUIPMENT FINANCING AND LEASING SEGMENT
Equipment Financing and Leasing had total financing and leasing assets of
$14.2 billion at December 31, 2002, representing 39.6% of total financing and
leasing assets. Total Equipment Financing and Leasing managed assets were $18.1
billion or 39.1% of total managed assets. We conduct our Equipment Financing and
Leasing operations through two strategic business units:
Equipment Financing offers secured equipment financing and
leasing and focuses on the broad distribution of its
products through manufacturers, dealers/distributors,
intermediaries and direct calling efforts primarily in
manufacturing, construction, food services/stores,
transportation and other industries.
Capital Finance offers secured equipment financing and
leasing by directly marketing customized transactions of
commercial aircraft and rail cars and locomotives.
Equipment Financing and Capital Finance personnel have extensive expertise
in managing equipment over its full life cycle, including purchasing new
equipment, maintaining and repairing equipment, estimating residual values and
re-marketing via re-leasing or selling equipment. Equipment Financing's and
Capital Finance's equipment and industry expertise enables them to effectively
manage residual value risk. For example, Capital Finance can repossess
commercial aircraft, if necessary, obtain any required maintenance and repairs
for such aircraft, and recertify such aircraft with appropriate authorities. We
manage the equipment, the residual value, and the risk of equipment remaining
idle for extended periods of time and, where appropriate, we locate alternative
equipment users or purchasers.
EQUIPMENT FINANCING
Equipment Financing had total financing and leasing assets of $8.1 billion
at December 31, 2002, representing 22.7% of our total financing and leasing
assets. On a managed asset basis, Equipment Financing represented $12.1 billion
or 26.1% of total managed assets at December 31, 2002. Equipment Financing
offers secured equipment financing and leasing products, including loans,
leases, wholesale and retail financing for distributors and manufacturers, loans
guaranteed by the U.S. Small Business Administration, operating leases, sale and
leaseback arrangements, portfolio acquisitions, revolving lines of credit and
in-house syndication capabilities. In connection with our acquisition by Tyco,
in fiscal 2002 Equipment Financing ceased origination of, and placed in
liquidation status, the trucking and franchise finance portfolios. The
portfolios approximated $0.5 billion at December 31, 2002.
Equipment Financing is a diversified, middle-market, secured equipment
lender with a global presence and strong North American marketing coverage. At
December 31, 2002, its portfolio included significant financing and leasing
assets to customers in a number of different industries, with manufacturing
being the largest as a percentage of financing and leasing assets, followed by
construction and transportation, including business aircraft.
Products are originated through direct calling on customers and through
relationships with manufacturers, dealers, distributors and intermediaries that
have leading or significant marketing positions in their respective industries.
This provides Equipment Financing with efficient access to equipment end-users
in many industries across a variety of equipment types.
CAPITAL FINANCE
Capital Finance had financing and leasing assets of $6.1 billion at December
31, 2002, which represented 16.9% of our total financing and leasing assets and
13.1% of managed assets. Capital Finance specializes in providing customized
leasing and secured financing primarily to end-users of commercial aircraft and
railcars, including operating leases, single investor leases, equity portions of
leveraged leases, and sale and leaseback arrangements, as well as loans secured
by equipment. Typical customers are major domestic and international airlines,
North American railroad companies and middle-market to larger-sized companies.
New business is generated through direct calling efforts supplemented with
transactions introduced by intermediaries and other referral sources. Capital
Finance utilizes special purpose entities (SPE's) to record certain structured
leasing transactions, primarily aerospace leveraged leases. These SPE's are
consolidated in CIT's financial statements.
4
Capital Finance has provided financing to commercial airlines for over
thirty years, and the commercial aerospace portfolio includes most of the
leading U.S. and foreign commercial airlines. As of December 31, 2002, the
commercial aerospace financing and leasing asset balance was $4.1 billion,
consisting of 78 accounts and 194 aircraft with an average age of approximately
6.9 years, and all comply with Stage III noise regulations.
Capital Finance has developed strong direct relationships with most major
airlines and major aircraft and aircraft engine manufacturers. This provides
Capital Finance with access to technical information, which enhances customer
service, and provides opportunities to finance new business. As of December 31,
2002, commitments to purchase commercial aircraft from both Airbus Industrie and
The Boeing Company totaled 79 units through 2007 at an approximate value of
$3,796.0 million. Additionally, in some cases CIT has the flexibility to delay
or terminate certain positions. As of December 31, 2002, all delivered aircraft
have been placed in service. Total deliveries for calendar year 2003 are 19, of
which twelve have customers in place as of December 31, 2002.
Capital Finance has over 25 years of experience in financing the rail
industry, contributing to its knowledge of asset values, industry trends,
product structuring and customer needs. Capital Finance has a dedicated rail
equipment group, maintains relationships with several leading railcar
manufacturers and has a significant direct calling effort on railroads and rail
shippers in the United States. The Capital Finance rail portfolio includes
leases to all of the U.S. and Canadian Class I railroads (which are railroads
with annual revenues of at least $250 million) and numerous shippers. The
operating lease fleet includes primarily covered hopper cars used to ship grain
and agricultural products, plastic pellets and cement; gondola cars for coal,
steel coil and mill service; open hopper cars for coal and aggregates; center
beam flat cars for lumber; and boxcars for paper and auto parts. The owned
operating lease railcar fleet is relatively young, with approximately 80% (based
upon net investment) built in 1994 or later. The Capital Finance rail owned and
serviced fleet totals in excess of 47,000 railcars and approximately 500
locomotives.
SPECIALTY FINANCE SEGMENT
At December 31, 2002, Specialty Finance financing and leasing assets totaled
$10.3 billion, representing 28.8% of total financing and leasing assets.
Specialty Finance managed assets were $16.9 billion, representing 36.4% of total
managed assets. These assets include small ticket commercial financing and
leasing assets, vendor programs and consumer home equity loans. Also included in
the owned financing and leasing assets are liquidating portfolios, which include
manufactured housing, recreational vehicles, recreational marine and wholesale
inventory finance.
Specialty Finance forms relationships with industry-leading equipment
vendors, including manufacturers, dealers and distributors, to deliver
customized asset-based sales and financing solutions in a wide array of vendor
programs. These alliances allow our vendor partners to better utilize core
competencies, reduce capital needs and drive incremental sales volume. As a part
of these programs, we offer (i) credit financing to the manufacturer's customers
for the purchase or lease of the manufacturer's products, and (ii) enhanced
sales tools to manufacturers and vendors, such as asset management services,
efficient loan processing and real-time credit adjudication. Higher-level
partnership programs provide integration with the vendor's business planning
process and product offering systems to improve execution and reduce cycle
times. Specialty Finance has significant vendor programs in information
technology and telecommunications equipment and serves many other industries
through its global network.
These vendor alliances feature traditional vendor finance programs, joint
ventures, profit sharing and other transaction structures with large,
sales-oriented corporate vendor partners. In the case of joint ventures,
Specialty Finance and the vendor combine financing activities through a distinct
legal entity that is jointly owned. Generally, Specialty Finance accounts for
these arrangements on an equity basis, with profits and losses distributed
according to the joint venture agreement, and purchases qualified finance
receivables originated by the joint venture. Specialty Finance also utilizes
'virtual joint ventures,' whereby the assets are originated on Specialty
Finance's balance sheet, while profits and losses are shared with the vendor.
These types of strategic alliances are a key source of business for Specialty
Finance. New vendor alliance business is also generated through intermediaries
and other referral sources, as well as through direct end-user relationships.
5
The Specialty Finance small-ticket commercial loan business is engaged
mainly in the leasing of office products, computers, point-of-sale equipment and
other technology products in the United States and Canada. Products are
originated through direct calling on customers and through relationships with
manufacturers, dealers, distributors and other intermediaries.
Home equity products include both fixed and variable-rate closed-end loans
and variable-rate lines of credit. This unit primarily originates, purchases and
services loans secured by first or second liens on detached, single-family,
residential properties. Customers borrow for the purpose of consolidating debts,
refinancing an existing mortgage, funding home improvements, paying education
expenses and, to a lesser extent, purchasing a home, among other reasons.
Specialty Finance primarily originates loans through brokers and correspondents
with a high proportion of home equity applications processed electronically over
the internet via BrokerEdge'sm' using proprietary systems. Through experienced
lending professionals and automation, Specialty Finance provides rapid
turnaround time from application to loan funding, which is critical to broker
relationships.
Specialty Finance sells individual loans and portfolios of loans to banks,
thrifts and other originators of consumer loans to maximize the value of its
origination network and to improve overall profitability. Contract servicing for
securitization trusts and other third parties is provided through a centralized
consumer Asset Service Center. Commercial assets are serviced via several
centers in the United States, Canada and internationally. Our Asset Service
Center centrally services and collects substantially all of our consumer
receivables, including loans originated or purchased by our Specialty Finance
segment, as well as loans originated or purchased and subsequently securitized
with servicing retained. The servicing portfolio also includes loans owned by
third parties that are serviced by our Specialty Finance segment for a fee on a
'contract' basis. These third-party portfolios totaled $2.2 billion at December
31, 2002.
COMMERCIAL FINANCE SEGMENT
At December 31, 2002, the financing and leasing assets of our Commercial
Finance Segment totaled $8.0 billion, representing 22.4% of total financing and
leasing assets and 17.3% of managed assets. We conduct our Commercial Finance
operations through two strategic business units, both of which focus on accounts
receivable and inventories as the primary source of security for their lending
transactions.
Commercial Services provides factoring and
receivable/collection management products and secured
financing to companies in apparel, textile, furniture, home
furnishings and other industries.
Business Credit provides secured financing, including term
and revolving loans based on asset values, as well as cash
flow and enterprise value structures to a full range of
borrowers from small to larger-sized companies.
Commercial Services
Commercial Services had total financing and leasing assets of $4.4 billion
at December 31, 2002, which represented 12.2% of our total financing and leasing
assets and 9.5% of managed assets. Commercial Services offers a full range of
domestic and international customized credit protection, lending and outsourcing
services that include working capital and term loans, factoring, receivable
management outsourcing, bulk purchases of accounts receivable, import and export
financing and letter of credit programs.
Financing is provided to clients through the purchase of accounts receivable
owed to clients by their customers, as well as by guaranteeing amounts due under
letters of credit issued to the clients' suppliers, which are collateralized by
accounts receivable and other assets. The purchase of accounts receivable is
traditionally known as 'factoring' and results in the payment by the client of a
factoring fee which is commensurate with the underlying degree of credit risk
and recourse, and which is generally a percentage of the factored receivables or
sales volume. When Commercial Services 'factors' (i.e., purchases) a customer
invoice from a client, it records the customer receivable as an asset and also
establishes a liability for the funds due to the client ('credit balances of
factoring clients'). Commercial Services also may advance funds to its clients
prior to collection of receivables, typically in an amount up to 80% of eligible
accounts receivable (as defined for that transaction), charging interest on such
advances (in addition to any factoring fees) and satisfying such advances from
receivables collections. The operating
6
systems of the clients and Commercial Services are integrated in order to
facilitate the factoring relationship.
Clients use Commercial Services' products and services for various purposes,
including improving cash flow, mitigating or reducing the risk of charge-offs,
increasing sales and improving management information. Further, with the
TotalSource'sm' product, clients can outsource bookkeeping, collection and other
receivable processing activities. These services are attractive to industries
outside the typical factoring markets, providing growth opportunities for
Commercial Services.
Commercial Services generates business regionally from a variety of sources,
including direct calling efforts and referrals from existing clients and other
referral sources. Accounts receivable, operations and other administrative
functions are centralized.
Business Credit
Financing and leasing assets of Business Credit totaled $3.6 billion at
December 31, 2002 and represented 10.2% of our total financing and leasing
assets and 7.9% of managed assets. Business Credit offers loan structures
ranging from asset-based revolving and term loans secured by accounts
receivable, inventories and fixed assets to loans based on earnings performance
and enterprise valuations to mid through larger-sized companies. Clients use
such loans primarily for working capital, growth, acquisitions,
debtor-in-possession financing and debt restructurings. Business Credit sells
and purchases participation interests in such loans to and from other lenders.
Through its variable rate, senior revolving and term products, Business
Credit meets its customer financing needs that are unfulfilled by other sources
of senior debt. Business Credit primarily structures financings on a secured
basis and, through its Corporate Finance unit, extends loans based upon the
sustainability of a customer's operating cash flow and ongoing enterprise
valuations. Revolving and term loans are made on a variable interest-rate basis
based upon published indices such as LIBOR or the prime rate of interest.
Business is originated regionally via solicitation activities focused upon
various types of intermediaries and referral sources. Business Credit has
increased its focus upon acquisition financings to compliment its debt
restructuring activities. Business Credit maintains long term relationships with
selected banks, finance companies, and other lenders to both source and
diversify senior debt exposures.
STRUCTURED FINANCE SEGMENT
Structured Finance had financing and leasing assets of $3.3 billion,
comprising 9.2% of our total financing and leasing assets and 7.2% of managed
assets at December 31, 2002. Structured Finance operates internationally through
operations in the United States, Canada and Europe. Structured Finance provides
specialized investment banking services to the international corporate finance
and institutional finance markets by providing asset-based financing for large
ticket asset acquisitions and project financing and related advisory services to
equipment manufacturers, corporate clients, regional airlines, governments and
public sector agencies. Communications (including telecommunication and media),
transportation, and the power and utilities sectors are among the industries
that Structured Finance serves.
Structured Finance also serves as an origination conduit to its lending
partners by seeking out and creating investment opportunities. Structured
Finance has established relationships with insurance companies and institutional
investors and can arrange financing opportunities that meet asset class, yield,
duration and credit quality requirements. Accordingly, syndication capability
and fee generation are key characteristics of Structured Finance's business.
Structured Finance utilizes SPE's to record certain structured leasing
transactions, including leveraged leases. These SPE's are generally consolidated
in our financial statements.
The segment had direct and private fund venture capital equity investments
totaling $335.4 million at December 31, 2002. In 2001, we ceased making new
venture capital investments beyond existing commitments, which totaled
approximately $164.9 million at December 31, 2002. In December 2002, we retained
a private equity firm, consisting of former CIT employees, to manage the
existing portfolio.
7
COMPETITION
Our markets are highly competitive and are characterized by competitive
factors that vary based upon product and geographic region. Competitors include
captive and independent finance companies, commercial banks and thrift
institutions, industrial banks, leasing companies, manufacturers and vendors
with global reach. Substantial financial services operations with global reach
have been formed by bank holding, leasing, finance and insurance companies that
compete with us. On a local level, community banks and smaller independent
finance and mortgage companies are a competitive force. Some competitors have
substantial local market positions. Many of our competitors are large companies
that have substantial capital, technological and marketing resources. Some of
these competitors are larger than we are and may have access to capital at a
lower cost than we do, particularly following the recent disruption to our
funding base. Competition had been enhanced by a strong economy and growing
marketplace liquidity prior to 2001, although, during 2002 and 2001, the economy
has slowed and marketplace liquidity has tightened. The markets for most of our
products are characterized by a large number of competitors, although the number
of competitors has fallen in recent years as a consequence of continued
consolidation in the industry.
We compete primarily on the basis of pricing, terms and structure. From time
to time, our competitors seek to compete aggressively on the basis of these
factors and we may lose market share to the extent we are unwilling to match
competitor pricing and terms in order to maintain interest margins and/or credit
standards.
Other primary competitive factors include industry experience, client
service and relationships. In addition, demand for our products with respect to
certain industries will be affected by demand for such industry's services and
products and by industry regulations.
REGULATION
Our operations are subject, in certain instances, to supervision and
regulation by state, federal and various foreign governmental authorities and
may be subject to various laws and judicial and administrative decisions
imposing various requirements and restrictions, which, among other things,
(i) regulate credit granting activities, including establishing licensing
requirements, if any, in applicable jurisdictions, (ii) establish maximum
interest rates, finance charges and other charges, (iii) regulate customers'
insurance coverages, (iv) require disclosures to customers, (v) govern secured
transactions, (vi) set collection, foreclosure, repossession and claims handling
procedures and other trade practices, (vii) prohibit discrimination in the
extension of credit and administration of loans, (viii) regulate the use and
reporting of information related to a borrower's credit experience and other
data collection. In addition, (i) CIT Bank, a Utah industrial loan corporation
wholly owned by CIT, is subject to regulation and examination by the Federal
Deposit Insurance Corporation and the Utah Department of Financial Institutions,
(ii) CIT Small Business Lending Corporation, a Delaware corporation wholly owned
by CIT, is licensed by and subject to regulation and examination by the U.S.
Small Business Administration, (iii) The Equipment Insurance Company, a Vermont
corporation wholly owned by CIT, and Highlands Insurance Company Limited, a
Barbados company wholly owned by CIT, are each licensed to enter into insurance
contracts and are regulated by the Departments of Insurance in Vermont and
Barbados, respectively, (iv) various banking corporations wholly owned by CIT in
France, Italy, Belgium and Sweden, are each subject to regulation and
examination by banking regulators in its home country, and (v) various
broker-dealer entities wholly owned by CIT in Canada, the United Kingdom, and
the United States are each subject to regulation and examination by securities
regulators in its home country.
EMPLOYEES
CIT employed approximately 5,835 people at December 31, 2002, of which
approximately 4,405 were employed in the United States and 1,430 were outside
the United States.
FACILITIES
CIT conducts its operations in the United States, Canada, Europe, Latin
America, Australia and the Asia-Pacific region. CIT occupies approximately 2.5
million square feet of office space, substantially all of
8
which is leased. Such office space is suitable and adequate for our needs and we
utilize, or plan to utilize, substantially all of our leased office space. We
are currently in negotiations to purchase our Livingston facility during 2003 at
a price that will result in expense levels that are comparable to the current
lease expenses.
LEGAL PROCEEDINGS
Except as set forth in our filings with the SEC, we are a defendant in
various lawsuits arising in the ordinary course of our business. We aggressively
manage our litigation and evaluate appropriate responses to our lawsuits in
light of a number of factors, including the potential impact of the actions on
the conduct of our operations. In the opinion of management, none of the pending
matters is expected to have a material adverse effect on our financial
condition, results of operations or liquidity. However, there can be no
assurance that an adverse decision in one or more of such lawsuits will not have
a material adverse effect.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of CIT
for each of the periods indicated.
THREE MONTHS TWELVE MONTHS NINE MONTHS
ENDED ENDED ENDED YEARS ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
------------ ------------- ------------- ---------------------
2002 2002 2001 2000 1999 1998
---- ---- ---- ---- ---- ----
(SUCCESSOR) (COMBINED) (PREDECESSOR)
Ratios of Earnings to Fixed 1.67x (1) 1.30x 1.39x 1.45x 1.49x
Charges
We have computed the ratios of earnings to fixed charges in accordance with
requirements of the SEC's Regulation S-K. Earnings consist of income from
continuing operations before income taxes and fixed charges. Fixed charges
consist of interest on indebtedness, minority interest in a subsidiary trust
holding solely debentures of CIT and one-third of rent expense which is deemed
representative of an interest factor.
(1) Earnings were insufficient to cover fixed charges by $6,331.1 million for
the twelve months ended September 30, 2002. Earnings for the twelve months
ended September 30, 2002 included a non-cash goodwill impairment charge of
$6,511.7 million in accordance with SFAS No. 142, 'Goodwill and Other
Intangible Assets.' The ratio of earnings to fixed charges included fixed
charges of $1,471.8 million and a loss before provision for income taxes of
$6,331.1 million resulting in a total loss provision for income taxes and
fixed charges of $(4,859.3) million.
9
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus and the documents
incorporated by reference are 'forward-looking statements' within the meaning of
the U.S. Private Securities Litigation Reform Act of 1995. All statements
contained herein that are not clearly historical in nature are forward-looking
and the words 'anticipate,' 'believe,' 'expect,' 'estimate' and similar
expressions are generally intended to identify forward-looking statements. Any
forward-looking statements contained herein, in press releases, written
statements or other documents filed with the Securities and Exchange Commission
(SEC) or in communications and discussions with investors and analysts in the
normal course of business through meetings, webcasts, phone calls and conference
calls, concerning our operations, economic performance and financial condition
are subject to known and unknown risks, uncertainties and contingencies.
Forward-looking statements are included, for example, in the discussions about:
our liquidity risk management,
our credit risk management,
our asset/liability risk management,
our capital, leverage and credit ratings,
our operational and legal risks,
our commitments to extend credit or purchase equipment, and
how we may be affected by legal proceedings.
All forward-looking statements involve risks and uncertainties, many of
which are beyond our control, which may cause actual results, performance or
achievements to differ materially from anticipated results, performance or
achievements. Also, forward-looking statements are based upon management's
estimates of fair values and of future costs, using currently available
information. Therefore, actual results may differ materially from those
expressed or implied in those statements. Factors that could cause such
differences include, but are not limited to:
risks of economic slowdown, downturn or recession,
industry cycles and trends,
risks inherent in changes in market interest rates and quality spreads,
funding opportunities and borrowing costs,
changes in funding markets, including commercial paper, term debt and the
asset-backed securitization markets,
uncertainties associated with risk management, including credit,
prepayment, asset/liability, interest rate and currency risks,
adequacy of reserves for credit losses,
risks associated with the value and recoverability of leased equipment and
lease residual values,
changes in laws or regulations governing our business and operations,
changes in competitive factors, and
future acquisitions and dispositions of businesses or asset portfolios.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of any debt securities
offered under this prospectus to provide additional working funds for us and our
subsidiaries. Generally, we use the proceeds of our short-term borrowings
primarily to originate and purchase receivables in the ordinary course of our
business. We have not yet determined the amounts that we may use in connection
with our business or that we may furnish to our subsidiaries. From time to time,
we may also use the proceeds to finance the bulk purchase of receivables and/or
the acquisition of other finance-related businesses.
10
DESCRIPTION OF DEBT SECURITIES
The debt securities offered by this prospectus will be unsecured obligations
of CIT and will be either senior debt or senior subordinated debt. Senior debt
will be issued under a senior debt indenture. Senior subordinated debt will be
issued under a senior subordinated debt indenture. The senior debt indenture and
the senior subordinated debt indenture are sometimes referred to in this
prospectus individually as an 'indenture' and collectively as the 'indentures.'
We have filed forms of the global senior indenture and subordinated indenture as
exhibits to the registration statement on Form S-3 (No. 333-103966) under the
Securities Act of 1933, of which this prospectus is a part. The terms of the
indentures are also governed by the applicable provisions of the Trust Indenture
Act of 1939.
The following briefly summarizes the material provisions of the indentures
and the debt securities, other than pricing and related terms disclosed in the
accompanying prospectus supplement. You should read the more detailed provisions
of the applicable indenture, including the defined terms, for provisions that
may be important to you. You should also read the particular terms of a series
of debt securities, which will be described in more detail in the applicable
prospectus supplement. Copies of the indentures may be obtained from CIT or the
applicable trustee. So that you may easily locate the more detailed provisions,
the numbers in parentheses below refer to sections in the applicable indenture
or, if no indenture is specified, to sections in each of the indentures.
Wherever particular sections or defined terms of the applicable indenture are
referred to, these sections or defined terms are incorporated into this
prospectus by reference and the statements in this prospectus are qualified by
that reference.
GENERAL
The indentures provide that any debt securities that we issue will be issued
in fully registered form. We may issue the debt securities in one or more
separate series of senior or senior subordinated securities. Debt securities in
a particular series may have different maturities or different purchase prices.
(See Section 2.01 of the indentures.)
The debt securities that we issue will constitute either 'superior
indebtedness' or 'senior subordinated indebtedness,' as those terms are defined
below. From time to time, we may issue senior debt securities or 'senior
securities,' in one or more separate series of debt securities. We will issue
each series of senior securities under separate indentures, each substantially
in the form of a global senior indenture filed with the SEC. We will enter into
each senior indenture with a banking institution organized under the laws of the
United States or one of the states thereof. We refer to this banking institution
as a 'senior trustee.'
From time to time, we may also issue senior subordinated debt securities as
one or more separate series of debt securities. We will issue each series of
senior subordinated securities under one or more separate indentures, each
substantially in the form of a senior subordinated global indenture filed with
the SEC. We will enter into each senior subordinated indenture with a banking
institution organized under the laws of the United States or one of the states
thereof. We refer to this banking institution as 'senior subordinated trustee.'
Limitations on Indebtedness. The terms of the senior indentures do not limit
the amount of debt securities or other unsecured superior indebtedness that we
may issue. The terms of the senior indentures also do not limit the amount of
subordinated debt, secured or unsecured, that we may issue. The terms of some of
the senior subordinated indentures may limit the amount of debt securities or
other unsecured senior subordinated indebtedness that we may issue or limit the
amount of junior subordinated indebtedness that we may issue. For a description
of these limitations, see 'Description of Debt Securities -- Restrictive
Provisions and Covenants' on pages 13-14. At December 31, 2002, there was no
senior subordinated indebtedness issued and outstanding. At December 31, 2002,
under the most restrictive provisions of the senior subordinated indentures, we
could issue up to approximately $4.5 billion of additional senior subordinated
indebtedness.
Original Issue Discount. Debt securities bearing no interest or a below
market interest rate when issued are known as original issue discount
securities. We will offer any original issue discount securities which we issue
at a discount, which may be substantial, below their stated principal amount.
You should
11
refer to the prospectus supplement for a description of federal income tax
consequences and other special considerations applicable to original issue
discount securities.
Particular Terms of Offered Debt Securities. You should refer to the
prospectus supplement for a description of the particular terms of any debt
securities that we offer for sale. The following are some of the terms of these
debt securities that we will describe in the prospectus supplement:
title, designation, total principal amount and authorized
denominations;
percentage of principal amount at which debt securities will
be issued;
maturity date or dates;
interest rate or rates (which may be fixed or variable) per
annum, the method of determining the interest rate or rates
and any original issue discount;
payment dates for interest and principal and the provisions
for accrual of interest;
provisions for any sinking, purchase or other comparable
fund;
any redemption terms;
designation of the place where registered holders of debt
securities may be paid or may transfer or redeem debt
securities;
designation of any foreign currency, including composite
currencies, in which the debt securities may be issued or
paid and any terms under which a holder of debt securities
may elect to be paid in a different currency than the
currency of the debt securities;
any index that may be used to determine the amounts of
principal, interest or any other payment due on the debt
securities; and
designation of the debt securities as senior securities or
senior subordinated securities. (See Section 2.01 of the
indentures.)
Payment. Unless otherwise specified in the prospectus supplement, we will
make all payments due on debt securities, less any applicable withholding taxes,
at the office of CIT or its agent maintained for this purpose in New York, New
York. However, at our option, we may pay interest, less any applicable
withholding taxes, by mailing a check to the address of the person entitled to
the interest as their name and address appear on our register. (See
Section 2.04 of the indentures.)
Transfer of Debt Securities. A registered holder of debt securities or a
properly authorized attorney of the holder, may transfer these debt securities
at our office or our agent's office. The prospectus supplement will describe the
location of these offices. We will not charge the holder a fee for any transfer
or exchange of debt securities, but we may require the holder to pay a sum
sufficient to cover any tax or other governmental charge in connection with a
transfer or exchange. (See Section 2.06 of the indentures.)
Certain Defined Terms. 'Indebtedness' in the definition of the terms
'superior indebtedness,' 'senior subordinated indebtedness,' and 'junior
subordinated indebtedness' means all obligations which in accordance with
generally accepted accounting principles should be classified as liabilities on
a balance sheet and in any event includes all debt and other similar monetary
obligations, whether direct or guaranteed.
'Superior indebtedness' means all of our indebtedness that is not by its
terms subordinate or junior to any of our other indebtedness. The senior
securities will constitute superior indebtedness.
'Senior subordinated indebtedness' means all of our indebtedness that is
subordinate only to superior indebtedness. The senior subordinated securities
will constitute senior subordinated indebtedness.
'Junior subordinated indebtedness' means all indebtedness of CIT that is
subordinate to both superior indebtedness and senior subordinated indebtedness.
SENIOR SECURITIES
The senior securities will be direct, unsecured obligations of CIT. Senior
securities will constitute superior indebtedness issued with equal priority to
the other superior indebtedness. At December 31, 2002,
12
CIT Group Inc.'s consolidated unaudited balance sheet reflected approximately
$24.6 billion of outstanding superior indebtedness.
The senior securities will be senior to all senior subordinated
indebtedness, including the senior subordinated securities. At December 31,
2002, CIT Group Inc.'s consolidated balance sheet reflected no outstanding
senior subordinated indebtedness and no outstanding junior subordinated
indebtedness.
SENIOR SUBORDINATED SECURITIES
The senior subordinated securities will be direct, unsecured obligations of
CIT. CIT will pay principal, premium, if any and interest on the senior
subordinated securities only after the prior payment in full of all superior
indebtedness of CIT, including the senior securities.
In the event of any insolvency, bankruptcy or similar proceedings, the
holders of superior indebtedness will be paid in full before any payment is made
on the senior subordinated securities. An event of default under or acceleration
of superior indebtedness does not in itself trigger the payment subordination
provisions applicable to senior subordinated securities. However, if the senior
subordinated securities are declared due and payable before maturity due to a
default, the holders of the senior subordinated securities will be entitled to
payment only after superior indebtedness is paid in full.
Due to these subordination provisions, if we become insolvent, the holders
of superior indebtedness may recover a higher percentage of their investment
than the holders of the senior subordinated securities. We intend that any
senior subordinated securities will be in all respects equal in right of payment
with the other senior subordinated indebtedness, including CIT's outstanding
senior subordinated securities. We also intend that all senior subordinated
securities will be superior in right of payment to all junior subordinated
indebtedness and to all outstanding capital stock.
RESTRICTIVE PROVISIONS AND COVENANTS
Negative Pledge. Generally, the indentures do not limit the amount of other
securities that we or our subsidiaries may issue. But each indenture contains a
provision, the 'Negative Pledge,' that we will not pledge or otherwise subject
to any lien any of our property or assets to secure indebtedness for money
borrowed, incurred, issued, assumed or guaranteed by us, subject to certain
exceptions. (See Section 6.04 of the indentures.)
Under the terms of the Negative Pledge, we are permitted to create the
following liens:
liens in favor of any of our subsidiaries;
purchase money liens;
liens existing at the time of any acquisition that we may
make;
liens in favor of the United States, any state or
governmental agency or department to secure obligations
under contracts or statutes;
liens securing the performance of letters of credit, bids,
tenders, sales contracts, purchase agreements, repurchase
agreements, reverse repurchase agreements, bankers'
acceptances, leases, surety and performance bonds and other
similar obligations incurred in the ordinary course of
business;
liens upon any real property acquired or constructed by us
primarily for use in the conduct of our business;
arrangements providing for our leasing of assets, which we
have sold or transferred with the intention that we will
lease back these assets, if the lease obligations would not
be included as liabilities on our consolidated balance
sheet;
liens to secure non-recourse debt in connection with our
leveraged or single-investor or other lease transactions;
consensual liens created in our ordinary course of business
that secure indebtedness that would not be included in total
liabilities as shown on our consolidated balance sheet;
13
liens created by us in connection with any transaction that
we intend to be a sale of our property or assets;
liens on property or assets financed through tax-exempt
municipal obligations;
liens arising out of any extension, renewal or replacement,
in whole or in part, of any financing permitted under the
Negative Pledge, so long as the lien extends only to the
property or assets, with improvements, that originally
secured the lien; and
liens that secure certain other indebtedness which, in an
aggregate principal amount then outstanding, does not exceed
10% of our consolidated net worth.
(See Section 6.04 of the indentures for the provisions of the Negative Pledge.)
In addition, in the senior subordinated indentures, we have agreed not to
permit:
the aggregate amount of senior subordinated indebtedness
outstanding at any time to exceed 100% of the aggregate
amount of the par value of our capital stock plus our
consolidated surplus (including retained earnings); or
the aggregate amount of senior subordinated indebtedness and
junior subordinated indebtedness outstanding at any time to
exceed 150% of the aggregate amount of the par value of the
capital stock plus our consolidated surplus (including
retained earnings). Under the more restrictive of these
tests, as of December 31, 2002, we could issue up to
approximately $4.5 billion of additional senior subordinated
indebtedness.
(See senior subordinated indenture Section 6.05.)
Restrictions on Mergers and Asset Sales. Subject to the provisions of the
Negative Pledge, the indentures will not prevent us from consolidating or
merging with any other corporation or selling our assets as or substantially as,
an entirety. However, if we are not the surviving corporation in a merger, the
surviving corporation must expressly assume our obligations under the
indentures. Similarly, if we were to sell our assets as or substantially as, an
entirety to another party, the purchaser must also assume our obligations under
the indentures. (See Section 15.01 of the senior indenture, Section 16.01 of the
senior subordinated indenture.)
The holders of at least a majority in principal amount of the outstanding
debt securities of any series may waive compliance with the restrictions of the
Negative Pledge. This waiver of compliance will bind all of the holders of that
series of debt securities. (See Section 6.06 of the senior indenture,
Section 6.07 of the senior subordinated indenture.)
Other than these restrictions, the indentures contain no additional
provisions limiting our ability to enter into a highly leveraged transaction.
MODIFICATION OF INDENTURE
Each indenture contains provisions permitting us and the trustee to amend,
modify or supplement the indenture or any supplemental indenture as to any
series of debt securities. Generally, these changes require the consent of the
holders of at least 66 2/3% of the outstanding principal amount of each series
of debt securities affected by the change.
Unanimous consent of the holders of a series of debt securities is required
for any of the following changes:
extending the maturity of that series of debt security,
reducing the rate, extending the time of payment of interest
or reducing any other payment due under that series of debt
security; or
reducing the percentage of holders required to consent to
any amendment or modification for purposes of that series of
debt security.
The rights, duties or immunities of the trustee cannot be modified without
the consent of the trustee.
(See Section 14.02 of the indentures.)
14
COMPUTATIONS FOR OUTSTANDING DEBT SECURITIES
In computing whether the holders of the requisite principal amount of
outstanding debt securities have taken action under an Indenture:
for an original issue discount security, we will use the
amount of the principal that would be due and payable as of
that date, as if the maturity of the debt had been
accelerated due to a default; or
for a debt security denominated in a foreign currency or
currencies, we will use the U.S. dollar equivalent of the
outstanding principal amount as of that date, using the
exchange rate in effect on the date of original issuance of
the debt security.
(See Section 1.02 of the indentures.)
EVENTS OF DEFAULT
Each indenture defines an 'event of default' with respect to any series of
debt securities. An event of default under an indenture is any one of the
following events that occurs with respect to a series of debt securities:
nonpayment for thirty days of any interest when due;
nonpayment of any principal or premium, if any, when due;
nonpayment of any sinking fund installment when due;
failure, after thirty days' appropriate notice, to perform
any other covenant in the indenture (other than a covenant
included in the indenture solely for the benefit of another
series of debt securities);
certain events in bankruptcy, insolvency or reorganization;
nonpayment of interest on our indebtedness, including
guaranteed indebtedness (other than indebtedness that is
subordinate) or nonpayment of any principal on any of our
indebtedness, in an aggregate amount exceeding $25 million,
as a result of which such indebtedness shall have been
accelerated and such acceleration shall not have been
annulled or rescinded within thirty days after written
notice thereof; or
any other event of default included in any indenture or
supplemental indenture.
(See Section 7.01 of the indentures.)
The trustee may withhold notice of any default (except in the payment of
principal of, premium, if any or interest, if any, on any series of debt
securities) if the trustee considers that withholding notice is in the interests
of the holders of that series of debt securities. (See Section 11.03 of the
indentures.)
Generally, each indenture provides that upon an event of default, the
trustee or the holders of not less than 25% in principal amount of any series of
debt securities then outstanding may declare the principal of all debt
securities of that series to be due and payable. (See Section 7.02 of the
indentures.)
You should refer to the prospectus supplement for any original issue
discount securities for disclosure of the particular provisions relating to
acceleration of the maturity of indebtedness upon the occurrence of an event of
default.
Within 120 days after the close of each fiscal year, we are required to file
with each trustee a statement, signed by specified officers, stating whether or
not the specified officers have knowledge of any default and, if so, specifying
each default, the nature of the default and what action, if any, has been taken
to cure the default. (See Section 6.05 of the senior indenture, Section 6.06 of
the senior subordinated indenture.)
Except in cases of default and acceleration, the trustee is not under any
obligation to exercise any of its rights or powers under an indenture at the
request of holders of debt securities, unless these holders offer the trustee a
reasonable indemnity. (See Section 11.01 of the indentures). As long as the
trustee has this indemnity, the holders of a majority in principal amount of any
series of debt securities outstanding may direct the time, method and place of
conducting any proceeding for any remedy available to the
15
trustee under the indenture or of exercising any trust or power conferred upon
the trustee. (See Section 7.08 of the indentures.)
DEFEASANCE OF THE INDENTURE AND DEBT SECURITIES
We may, at any time, satisfy our obligations with respect to payments on any
series of debt securities by irrevocably depositing in trust with the trustee
cash or Government Obligations, as defined in the indenture or a combination
thereof sufficient to make payments on the debt securities when due. If we make
this deposit in a sufficient amount, properly verified, then we would discharge
all of our obligations with respect to that series of debt securities and the
indenture insofar as it relates to that series of debt securities, except as
otherwise provided in the indenture. In the event of this defeasance, holders of
that series of debt securities would be able to look only to the trust fund for
payment on that series of debt securities until the date of maturity or
redemption. Our ability to defease debt securities of any series using this
trust fund is subject to certain tax, legal and stock exchange requirements.
(See Sections 12.01, 12.02 and 12.03 of the indentures.)
INFORMATION CONCERNING THE TRUSTEES
We may periodically borrow funds from any of the trustees. We and our
subsidiaries may maintain deposit accounts and conduct other banking
transactions with any of the trustees. A trustee under a senior indenture or a
senior subordinated indenture may act as trustee under any of CIT's other
indentures.
PLAN OF DISTRIBUTION
We may sell the debt securities being offered hereby:
directly to purchasers;
through agents;
to dealers; or
through an underwriter or a group of underwriters.
We may directly solicit offers to purchase debt securities. We may also
solicit offers through our agents. Unless otherwise indicated in the prospectus
supplement, any agent will be acting on a best efforts basis for the period of
its appointment (ordinarily five business days or less). Under our agreements
with agents, we may indemnify agents against certain civil liabilities,
including liabilities under the Securities Act of 1933.
We may also sell debt securities through a dealer as principal. The dealer
may then resell the debt securities to the public at varying prices to be
determined by the dealer at the time of resale. Under our agreements with
dealers, we may indemnify dealers against certain civil liabilities, including
liabilities under the Securities Act.
We may also use one or more underwriters to sell debt securities. Under our
agreements with underwriters, we may indemnify underwriters against certain
liabilities, including liabilities under the Securities Act. The names of the
underwriters and the terms of the debt securities will be set forth in the
prospectus supplement. When reselling debt securities to the public, the
underwriters will deliver the prospectus supplement and this prospectus to
purchasers of debt securities, as required by applicable law.
The underwriters, dealers, and agents may be deemed to be underwriters under
the Securities Act. Any discounts, commissions, or concessions that they receive
from us or any profit they make on the resale of debt securities may be deemed
to be underwriting discounts and commissions under the Securities Act. We will
disclose in the prospectus supplement any person who may be deemed to be an
underwriter and any compensation that we have paid to any underwriter. We may
have various other commercial relationships with our underwriters, dealers, and
agents.
If disclosed in the prospectus supplement, we may authorize underwriters and
agents to solicit offers by certain institutions to purchase offered debt
securities from us at the public offering price set forth in the prospectus
supplement pursuant to contracts providing for payment and delivery on the date
stated in the prospectus supplement. Each contract will be for an amount not
less than, and unless we otherwise
16
agree the aggregate principal amount of offered debt securities sold pursuant to
contracts will be not less nor more than, the amounts stated in the prospectus
supplement. We may authorize underwriters and agents to enter into contracts
with institutions including commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions,
and other institutions, all subject to our approval. Contracts will not be
subject to any conditions except that any purchase of debt securities by an
institution pursuant to a contract must be permitted under applicable laws. We
will disclose in the prospectus supplement any commission that we pay to
underwriters and agents who sell debt securities pursuant to contracts.
Underwriters and agents will have no responsibility in respect of the delivery
or performance of contracts.
The place and time of delivery for the debt securities will be set forth in
the prospectus supplement.
EXPERTS
The consolidated balance sheets of CIT Group Inc. and its subsidiaries as of
December 31, 2002, September 30, 2002 and September 30, 2001 and the related
consolidated statements of income, stockholders' equity and cash flows for the
three months ended December 31, 2002, the year ended September 30, 2002, the
period from June 2, 2001 through September 30, 2001 and the period from January
1, 2001 through June 1, 2001, incorporated by reference herein and in the
registration statement of which this prospectus forms a part, have been so
incorporated by reference in reliance on the reports of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated statements of income, changes in shareholders' equity and
cash flows of The CIT Group, Inc. and subsidiaries for the year ended December
31, 2000, have been incorporated by reference herein and in the registration
statement of which this prospectus forms a part, in reliance on the report of
KPMG LLP, independent accountants, also incorporated by reference herein, and
upon the authority of KPMG LLP as experts in accounting and auditing.
LEGAL OPINIONS
The validity of the debt securities offered will be passed upon for us by
Schulte Roth & Zabel LLP.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Registration Statement on Form S-3 to register
the debt securities being offered in this prospectus. This prospectus, which
forms part of the registration statement, does not contain all of the
information included in the registration statement. For further information
about us and the securities offered in this prospectus, you should refer to the
registration statement and its exhibits. You may read and copy any document that
CIT files at the SEC's Public Reference Rooms at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can also request copies of the documents, upon
payment of a duplicating fee, by writing the Public Reference Section of the
SEC. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. These SEC filings are also available to
the public from the SEC's web site at http://www.sec.gov. Certain of our
securities are listed on the New York Stock Exchange and reports and other
information concerning us can also be inspected at the offices of the New York
Stock Exchange at 20 Broad Street, New York, New York 10005. You can also obtain
more information about us by visiting our web site at http://www.cit.com.
The SEC allows us to 'incorporate by reference' the information we file with
the SEC and information our predecessors filed in the past with the SEC, which
means we can disclose important information to you by referring you to those
documents. The information included in the following documents is incorporated
by reference and is considered to be a part of this prospectus. The most recent
information that we file with the SEC automatically updates and supersedes older
information.
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We are incorporating by reference into this prospectus the following
documents previously filed with the SEC:
1. Our Annual Report on Form 10-K for the fiscal year ended September 30,
2002.
2. Our Transition Report on Form 10-K for the transition period from October
1, 2002 to December 31, 2002.
3. Our Current Reports on Form 8-K filed January 23, 2003, January 24, 2003,
February 28, 2003, March 5, 2003, March 12, 2003, April 11, 2003,
April 22, 2003 and April 25, 2003.
Until we have sold all of the debt securities that we are offering for sale
under this prospectus, we also incorporate by reference all documents that we
will file in the future pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act.
We will provide without charge to each person who receives a prospectus,
including any beneficial owner, a copy of the information that has been
incorporated by reference in this prospectus. If you would like to obtain this
information from us, please direct your request, either in writing or by
telephone, to Glenn Votek, Executive Vice President and Treasurer, CIT Group
Inc., 1 CIT Drive, Livingston, New Jersey 07039, telephone (973) 740-5000.
You should rely only on the information provided in this prospectus and the
prospectus supplement, as well as the information incorporated by reference. CIT
has not authorized anyone to provide you with different information. CIT is not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus, the
prospectus supplement or any documents incorporated by reference is accurate as
of any date other than the date on the front of the applicable document.
18
CIT InterNotes'r'
CIT Group Inc.
U.S. $4,000,000,000
CIT InterNotes'r'
Prospectus Supplement
MAY 9, 2003
[CIT LOGO]
STATEMENT OF DIFFERENCES
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The service mark symbol shall be expressed as ..............................'sm'