ITEM 1. BUSINESS
Capita Preferred Trust (the "Trust") was established as a Delaware statuatory business trust for the purpose of issuing 9.06% Trust Originated Preferred Securities (the "Trust Preferred Securities"). On October 25, 1996, the Trust issued $200 million of Trust Preferred Securities to the public (the "Offering"). The Trust invested the proceeds received from the Offering and additional proceeds received from the issuance of Trust common securities to AT&T Capital Corporation (the "Company") in Partnership Preferred Securities (the "Partnership Preferred Securities") of its affiliate, Capita Preferred Funding L.P. (the "Partnership"). The Trust and the Partnership are consolidated subsidiaries of the Company. The Partnership, in turn, used proceeds from the issuance of the Partnership Preferred Securities and a Company capital contribution to invest primarily in 20-year debentures of the Company and two wholly-owned subsidiaries of the Company (the "Debentures"). Payments in respect to the Debentures issued by the Company's subsidiaries have been guaranteed, on a subordinated basis, by the Company.
Holders of the 8,000,000 outstanding shares of Trust Preferred Securities are entitled to receive quarterly cash distributions at an annual rate of 9.06% and a liquidation amount of $25 per share. Under the terms of the Offering, the Company issued an irrevocable guarantee, to the extent the Trust has funds available therefor, on the distributions, redemption and liquidation of the Trust Preferred Securities. Distributions will be made on the Trust Preferred Securities to the extent that the Trust has funds available, which is dependent on the payment of distributions on the Partnership Preferred Securities by the Partnership to its limited partner, the Trust. Distributions on the Partnership Preferred Securities will be declared and paid only as determined in the sole discretion of the Company in its capacity as the general partner of the Partnership. The Partnership's ability to pay such distributions to the Trust is dependent on the receipt of interest payments on the Debentures.
On January 12, 1998, all of the Company's outstanding shares of common stock were purchased by Newcourt Credit Group Inc., an Ontario corporation ("Newcourt") in a transaction accounted for under the purchase method of accounting (the "Newcourt Acquisition"). The Company currently is an indirect wholly-owned subsidiary of Newcourt.
On February 9, 1998, the Company and Newcourt entered into a support agreement (the "Newcourt Support Agreement"). The Newcourt Support Agreement requires Newcourt to own a majority of the outstanding shares of common stock of the Company, to cause the Company and its subsidiaries to have a consolidated tangible net worth of at least $1.00 and to provide funds to the Company (upon the request of the Company) sufficient to enable the Company to make timely payments of principal and interest payments on its debt for borrowed money (if the Company is unable to do so).
On February 20, 1998, the Company entered into an agreement whereby the Company guarantees certain indebtedness and liquidity facilities of Newcourt and Newcourt Credit Group USA Inc. (the "Newcourt Guarantee"). This debt is used by Newcourt for general operating purposes. As of February 28, 1998, the Company guarantee of such debt was $1.4 billion (C$2.0 billion).
The Newcourt Guarantee, ranks pari passu to the liabilities of the Company. As disclosed in the Trust's registration statement filed on Form S-3 in October 1996, the Company guaranteed, on a subordinate basis the Trust's distributions (the "Trust Guarantee"). The Trust Guarantee ranks subordinate and junior to all other liabilities of AT&T Capital. Thus, the Trust Guarantee ranks subordinate to the Newcourt Guarantee.
The ownership of the Trust Preferred Securities was not affected by the Newcourt Acquisition and related transactions.
For additional information regarding the description of the Trust, see the Trust's Prospectus dated October 22, 1996 comprising a portion of the Registration Statement on Form S-3 (No. 333-11243) filed by the Trust with the Securities and Exchange Commission, which is incorporated by reference herein.
ITEM 2.
ITEM 2. PROPERTIES
The Trust owns no physical properties.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Trust has no pending legal proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matter has been submitted to a vote of the holders of the Trust Preferred Securities through the solicitation of proxies or otherwise.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Trust Preferred Securities. As of March 20, 1998 there were 114 holders of record.
ITEM 6.
ITEM 6.SELECTED FINANCIAL DATA
The Results of Operations Data as well as the Balance Sheet Data are derived from the Financial Statements of the Trust at such date and for such period, which have been audited by Arthur Andersen LLP, independent public accountants for 1997 and Coopers & Lybrand L.L.P., independent accountants for 1996.
Results of Operations Data
For the Year For the Period Ended August 29, 1996 to December 31, 1997 December 31, 1996
Total Revenues $ 18,680,000 $ 3,425,000 Total Distributions $ 18,680,000 $ 3,425,000
Balance Sheet Data December 31, 1997 December 31, 1996
Total Assets $206,186,000 $206,186,000 Total Shareowners' Equity $206,186,000 $206,186,000
ITEM 7.
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Results of Operations and Changes in Cash Flows
On October 25, 1996, Capita Preferred Trust (the "Trust") issued $200 million of Trust Originated Preferred Securities (the "Trust Preferred Securities") to the public (the "Offering"). The Trust invested the Offering proceeds and $6.2 million of proceeds from the issuance of Trust common securities to AT&T Capital Corporation (the "Company"), in Partnership Preferred Securities of its affiliate, Capita Preferred Funding L.P. (the "Partnership"). The Trust and the Partnership are consolidated subsidiaries of the Company. The Partnership, in turn, used proceeds from the issuance of Partnership Preferred Securities to invest primarily in 20-year debentures of the Parent and two wholly-owned subsidiaries of the Company (the "Debentures").
During 1997 and 1996, holders of the 8,000,000 shares outstanding of Trust Preferred Securities were paid the required quarterly cash distributions totaling $18.7 million and $3.4 million, respectively (annual fixed rate of 9.06%). On those same quarterly distribution dates, the Trust also received quarterly distributions totaling $18.7 million and $3.4 million, for 1997 and 1996, respectively (annual rate of 9.06%) from the Partnership relating to the Trust's $206.2 million limited partnership interest in the Partnership.
ITEM 8.
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CAPITA PREFERRED TRUST BALANCE SHEETS (dollars in thousands)
As of December 31, 1997 1996 ---- ---- ASSET - Limited partnership interest in Partnership $206,186 $206,186 ======== ========
SHAREOWNERS' EQUITY: Trust Preferred Securities - authorized, issued and outstanding 8,000,000 shares, $25 liquidation value 200,000 200,000 Trust Common Securities - $25 liquidation value 6,186 6,186 -------- -------- Total Shareowners' Equity $206,186 $206,186 ======== ========
The accompanying notes are an integral part of these Financial Statements.
CAPITA PREFERRED TRUST STATEMENTS OF INCOME (dollars in thousands)
For The Year For The Period Ended August 29, 1996 December 31, To December 31, 1997 1996 ------------- ----------------
REVENUES - Distributions on Partnership Preferred Securities $18,680 $ 3,425 ------- --------
Net income $18,680 $ 3,425 ======= ========
The accompanying notes are an integral part of these Financial Statements.
CAPITA PREFERRED TRUST STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY (dollars in thousands)
For The Year For The Period Ended August 29, 1996 December 31, To December 31, 1997 1996 ------------- ---------------
PREFERRED SECURITIES:
Balance at beginning of period $ 200,000 $ 0 Securities issued 0 200,000 --------- --------- Balance at end of period 200,000 200,000 --------- ---------
COMMON SECURITIES: Balance at beginning of period 6,186 0 Securities issued 0 6,186 --------- --------- Balance at end of period 6,186 6,186 --------- ---------
RETAINED EARNINGS: Balance at beginning of period 0 0 Net Income 18,680 3,425 Less: Preferred distributions (18,120) (3,322) Common distributions (560) (103) --------- --------- Total distributions (18,680) (3,425) --------- --------- Balance at end of period 0 0 --------- ---------
Total Shareowners' equity $ 206,186 $ 206,186 ========= =========
The accompanying notes are an integral part of these Financial Statements.
CAPITA PREFERRED TRUST STATEMENTS OF CASH FLOWS (dollars in thousands)
For The Year For The Period Ended August 29, 1996 December 31, To December 31, 1997 1996 ------------ --------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 18,680 $ 3,425 --------- --------- Net Cash provided by Operating activities 18,680 3,425 --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of Limited Partnership Preferred Securities 0 (206,186) --------- --------- Net Cash used for Investing Activities 0 (206,186) --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Payment of distributions (18,680) (3,425) Issuance of Trust Preferred Securities 0 200,000 Issuance of Trust Common Securities 0 6,186 --------- --------- Net Cash provided by Financing activities (18,680) 202,761 --------- ---------
Net change in cash and cash equivalents 0 0
Cash and cash equivalents at beginning of period 0 0 --------- --------- Cash and cash equivalents at end of period $ 0 $ 0 ========= =========
The accompanying notes are an integral part of these financial statements.
CAPITA PREFERRED TRUST NOTES TO THE FINANCIAL STATEMENTS
1. Description of the Trust
Capita Preferred Trust (the "Trust") was established as a Delaware statuatory business trust for the purpose of issuing 9.06% Trust Originated Preferred Securities (the "Trust Preferred Securities"). On October 25, 1996 the Trust issued $200 million of Trust Preferred Securities to the public (the "Offering"). The Trust invested the proceeds received from the Offering and the issuance of $6.2 million common securities to AT&T Capital Corporation (the "Company") (the "Trust Common Securities") in exchange for Partnership Preferred Securities of its affiliate, Capita Preferred Funding L.P. (the "Partnership"). The Trust and the Partnership are consolidated subsidiaries of the Company. The Partnership, in turn, used proceeds from the issuance of the Partnership Preferred Securities and a Company capital contribution to invest primarily in 20-year debentures of the Company and two wholly-owned subsidiaries of the Company (the "Debentures"). Payments in respect to the Debentures issued by the Company's subsidiaries have been guaranteed, on a subordinated basis, by the Company.
On January 12, 1998, all of the Company's outstanding shares of common stock were purchased by Newcourt Credit Group Inc., an Ontario corporation ("Newcourt") in a transaction accounted for under the purchase method of accounting (the "Newcourt Acquisition"). The Company currently is an indirect wholly-owned subsidiary of Newcourt.
On February 9, 1998, the Company and Newcourt entered into a support agreement (the "Newcourt Support Agreement"). The Newcourt Support Agreement requires Newcourt to own a majority of the outstanding shares of common stock of the Company, to cause the Company and its subsidiaries to have a consolidated tangible net worth of at least $1.00 and to provide funds to the Company (upon the request of the Company) sufficient to enable the Company to make timely payments of principal and interest payments on its debt for borrowed money (if the Company is unable to do so).
On February 20, 1998, the Company entered into an agreement whereby the Company guarantees certain indebtedness and liquidity facilities of Newcourt and Newcourt Credit Group USA Inc. (the "Newcourt Guarantee"). This debt is used by Newcourt for general operating purposes. As of February 28, 1998, the Company guarantee of such debt was $1.4 billion (C$2.0 billion).
The Newcourt Guarantee, ranks pari passu to the liabilities of the Company. As disclosed in the Trust's registration statement filed on Form S-3 in October 1996, the Company guaranteed, on a subordinate basis the Trust's distributions (the "Trust Guarantee"). The Trust Guarantee ranks subordinate and junior to all other liabilities of AT&T Capital. Thus, the Trust Guarantee ranks subordinate to the Newcourt Guarantee.
The ownership of the Trust Preferred Securities was not affected by the Newcourt Acquisition and related transactions.
2. Summary of Significant Accounting policies
Principles of Consolidation
The Trust, as the limited partner of the Partnership, accounts for its investment in the Partnership under the equity method of accounting.
Revenue Recognition
Revenue from Partnership distributions are recorded on the accrual basis. Distributions recorded on the accompanying Statements of Income reflect the scheduled quarterly distribution payable on the Partnership Preferred Securities at a rate per annum of 9.06%.
Cash and Cash Equivalents
The Trust considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Trust's cash is held by a New York money center bank, in a demand deposit account.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period reported. Actual results could differ from those estimates.
Administrative Cost
All costs and expenses of the Trust are paid by the Company.
3. Administration of the Trust
Pursuant to the Trust's declaration of trust (the "Declaration of Trust"), there are four trustees (the "Trustees"). Two of the Trustees (the "Regular Trustees") are individuals who are employees or officers of or who are affiliated with the Company. The third trustee, The First National Bank of Chicago, N.A., is indenture trustee for purposes of compliance with the provisions of the Trust Indenture Act (the "Property Trustee"). The fourth trustee, First Chicago Delaware Inc., maintains its principal place of business in the State of Delaware (the "Delaware Trustee"). For purposes of compliance with the Trust Indenture Act, The First National Bank of Chicago, N.A. also acts as trustee under the Trust Guarantee (the "Trust Guarantee").
The Property Trustee holds title to the Partnership Preferred Securities for the benefit of the holders of the Trust Securities, and the Property Trustee has the power to exercise all rights, powers and privileges with respect to the Partnership Preferred Securities under the Amended and Restated Agreement of Limited Partnership dated August 29, 1996 to be entered into by the Company and the Trust as the holder of the Partnership Preferred Securities. In addition, the Property Trustee
maintains exclusive control of a segregated non-interest bearing bank account to hold all payments made in respect of the Partnership Preferred Securities for the benefit of the holders of the Trust Preferred Securities. The Trust Guarantee trustee holds the Trust Guarantee for the benefit of the holders of the Trust Preferred Securities. The Company, as the holder of all the Trust Common Securities, has the right to appoint, remove or replace any of the Trustees and to increase or decrease the number of trustees, provided that the number of trustees shall be at least three; provided further that at least one trustee shall be a Delaware Trustee, at least one trustee shall be the Property Trustee and at least one Trustee shall be a Regular Trustee. The Company has paid all fees and expenses related to the organization and operations of the Trust and the Offering and is responsible for all debts and obligations of the Trust (other than with respect to the Trust Preferred Securities).
For so long as the Trust Preferred Securities remain outstanding, the Company covenants (i) to maintain directly 100% ownership of the Trust Common Securities, (ii) to cause the Trust to remain a statutory business trust and not to voluntarily dissolve, wind-up, liquidate or be terminated, except as permitted by the Declaration of the Trust, (iii) to use its commercially reasonable efforts to ensure that the Trust will not be an "investment company" for purposes of the Investment Company Act of 1940, as amended, and (iv) to take no action which would be reasonably likely to cause the Trust to be classified as an association or a publicly traded partnership taxable as a corporation for United States federal income tax purposes. See Note 4 for a discussion of Income Taxes.
4. Income Taxes
The Trust is classified for United States (U.S.) federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Therefore, the Trust is not a tax paying entity. Accordingly, for U.S. federal income tax purposes, each holder of Trust Preferred Securities is considered the owner of an individual interest in the Partnership Preferred Securities held by the Trust, and each holder is required to include in its gross income its distributive share of income attributable to the Partnership, which generally is equal to such holder's allocable share of amounts accrued on the Partnership Preferred Securities. No amount included in income with respect to the Trust Preferred Securities is eligible for the corporate dividends-received deduction.
5. Distributions
Holders of the 8,000,000 outstanding shares of Trust Preferred Securities are entitled to receive quarterly cash distributions in arrears at an annual rate of 9.06% and a liquidation amount of $25 per share. Under the terms of the Offering, the Company issued an irrevocable guarantee, to the extent the Trust has funds available therefor, on the distributions, redemption and liquidation of the Trust Preferred Securities. Distribution will be made on the Trust Preferred Securities to the extent that the Trust has funds available, which is dependent on the payment of distributions on the Partnership Preferred Securities by the Partnership to its limited partner, the Trust. Distributions on the
Partnership Preferred Securities will be declared and paid only as determined in the sole discretion of the Company in its capacity as the general partner of the Partnership. The Partnership's ability to pay such distributions to the Trust is dependent on the receipt of interest payments on the Debentures.
6. Financial information of the Partnership
Summarized financial information for the Partnership, accounted for by the equity method is as follows (dollars in thousands):
At December 31, 1997 1996 ----- -----
Current assets $ 2,434 $ 2,426 Noncurrent assets 240,146 240,146 Partners' Capital $242,580 $242,572
The Year Ended August 29, 1996 To December 31,1997 December 31, 1996 ---------------- ------------------
Revenues $21,438 $ 3,931 Net Income $21,438 $ 3,931
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Trust Preferred Security Holders and Trustees of Capita Preferred Trust:
We have audited the accompanying balance sheet of Capita Preferred Trust (the "Trust") as of December 31, 1997, and the related statements of income, changes in shareowners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Trust as of December 31, 1997, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York March 27, 1998
REPORT OF INDEPENDENT ACCOUNTANTS
------------------------------
To the Trust Preferred Security Holders and Trustees of Capita Preferred Trust:
We have audited the balance sheet of Capita Preferred Trust (the "Trust") at December 31, 1996, and the related statements of income, changes in shareowners' equity and cash flows for the period August 29, 1996 (Date of Formation) to December 31, 1996. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Trust at December 31, 1996, and the results of its operations and its cash flows for the period August 29, 1996 to December 31, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas New York, New York April 14, 1997
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On February 12, 1997, the Audit Committee of the Board of Directors (with the concurrence of the Board of Directors) of the Company dismissed Coopers & Lybrand L.L.P. as the Company's and Trust's independent public accountants and appointed Arthur Andersen LLP to serve as the Company's and Trust's independent accountants for the year 1997. There have been no disagreements with Coopers & Lybrand L.L.P. on any accounting or financial disclosure during the past two fiscal years, preceding February 12, 1997.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Not applicable as there are no employees of the Trust. The Company pays all fees and expenses related to the organization and operations of the Trust.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Not applicable as there are no employees of the Trust. The Company pays all fees and expenses related to the organization and operations of the Trust.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Not Applicable.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None, other than as set forth in Items 1, 10 and 11.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
a) Documents filed as a part of the report:
(1) Financial Statements: - Balance Sheets - Statements of Income - Statements of Changes in Shareowners' Equity - Statements of Cash Flows - Notes to the Financial Statements - Report of Independent Public Accountants
(2) Financial statement schedules are omitted because the required information is included in the financial statements or notes thereto or because of the absence of condition under which they are required.
(3) Exhibits:
Exhibit Number 4.1 Certificate of Trust of the registrant is incorporated by reference to Exhibit 4.1 of the registrant's Registration Statement on Form S-3 [No. 333-11243] filed with the Securities and Exchange Commission.
4.2 Form of Amended and Restated Declaration of Trust of the registrant is incorporated by reference to Exhibit 4.2 of the registrant's Registration Statement on Form S-3 [No. 333-11243] filed with the Securities and Exchange Commission.
4.3 Form of Trust Preferred Securities Guarantee Agreement between AT&T Capital Corporation and The First National Bank of Chicago, N.A., as guarantee trustee incorporated by reference to Exhibit 4.6 of the registrant's Registration Statement on Form S-3 [No. 333-11243] filed with the Securities and Exchange Commission.
10(a) AT&T Capital Corporation, Capita Preferred Funding L.P., Capita Preferred Trust Prospectus dated October 22, 1996 is incorporated by reference to the Registration Statement on Form S-3 (No. 333-11243) dated October 21, 1996 filed with the Securities and Exchange Commission.
27 Financial Data Schedule
b) Current Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CAPITA PREFERRED TRUST
GLENN A. VOTEK -------------- By: Glenn A. Votek Regular Trustee March 27, 1998