The
information contained in this preliminary prospectus supplement
and the accompanying prospectus is not complete and may be
changed. This preliminary prospectus
supplement and the accompanying prospectus are
not an offer to sell nor do they seek an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
We are offering 40,000,000 shares of our Class A
common stock in this offering. We will receive all of the net
proceeds from the sale of such Class A common stock.
Our Class A common stock is listed on the New York Stock
Exchange under the symbol “FCEA.” The last reported
sale price of our Class A common stock as reported on the
New York Stock Exchange on May 12, 2009 was $7.93 per
share.
Investing in our Class A common stock involves risks.
You should carefully consider the risk factors beginning on
page S-7
of this prospectus supplement and the risk factors beginning on
page 4 of our Annual Report on
Form 10-K
for the year ended January 31, 2009 before purchasing
shares of our Class A common stock.
Per Share
Total
Public offering price
$
$
Underwriting discount(1)
$
$
Proceeds, before expenses, to Forest City
$
$
(1)
The underwriters will receive no underwriting discount with
respect to 800,000 of the shares of Class A common stock
reserved for sale by us to certain of our affiliates, as
described below.
The underwriters have reserved for sale by us 800,000 of the
shares of our Class A common stock offered by this
prospectus supplement for members of the Ratner and Miller
families, including certain of our executive officers and
members of our current board of directors at the public offering
price less the underwriting discount. The Ratner and Miller
families, together with the Shafran family, have a controlling
ownership interest in the Company. In addition, the underwriters
have reserved for sale at the public offering price up to
1,870,000 additional shares of our Class A common stock offered
by this prospectus supplement to these persons. The number of
shares of Class A common stock available for sale to the
general public will be reduced to the extent such persons
purchase these reserved shares. Each of these persons has
entered into a
lock-up
agreement, as described in the “Underwriting” section
beginning on
page S-13
of this prospectus supplement.
To the extent that the underwriters sell more than
40,000,000 shares of Class A common stock, the
underwriters have the option to purchase an additional
6,000,000 shares of Class A common stock from us at
the initial price to the public less the underwriting discount.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The shares of Class A common stock will be ready for
delivery on or about May , 2009.
Description of Senior Debt Securities We May Offer
4
Description of Subordinated Debt Securities We May Offer
12
Description of Preferred Stock We May Offer
24
Description of Depositary Shares We May Offer
26
Description of Class A Common Stock We May Offer
29
Description of Warrants We May Offer
30
Plan of Distribution
32
Legal Matters
34
Experts
34
This document is in two parts. The first part is this
prospectus supplement, which describes the specific terms of
this Class A common stock offering and also adds to and
updates information contained in the accompanying prospectus and
the documents incorporated by reference into the prospectus. The
second part, the accompanying prospectus, gives more general
information, some of which does not apply to this offering. If
the description of the offering varies between this prospectus
supplement and the accompanying prospectus, you should rely on
the information contained in this prospectus supplement.
However, if any statement in one of these documents is
inconsistent with a statement in another document having a later
date — for example, a document incorporated by
reference into the accompanying prospectus — the
statement in the document having the later date modifies or
supersedes the earlier statement.
You should rely only on the information contained in this
prospectus supplement, contained in or incorporated by reference
into the accompanying prospectus to which we have referred you
or contained in any free writing prospectus prepared by or on
behalf of us. We have not authorized anyone to provide you with
information that is different. The information contained in this
prospectus supplement and contained, or incorporated by
reference, into the accompanying prospectus is accurate only as
of the respective dates thereof, regardless of the time of
delivery of this prospectus supplement
and the accompanying prospectus or of any sale of our
Class A common stock. It is important for you to read and
consider all information contained in this prospectus supplement
and the accompanying prospectus, including the documents
incorporated by reference therein, in making your investment
decision. You should also read and consider the information in
the documents to which we have referred you under the caption
“Where You Can Find More Information” in this
prospectus supplement.
References in this prospectus supplement and in the
accompanying prospectus to “we,”“us,”“the Company” or “Forest City” or other
similar terms mean Forest City Enterprises, Inc. and its
consolidated subsidiaries, unless we state otherwise or the
context indicates otherwise.
This summary highlights selected information from this
prospectus supplement and the accompanying prospectus, but may
not contain all information that may be important to you. This
prospectus supplement and the accompanying prospectus include
specific terms of this offering, information about our business
and financial data. We encourage you to read this prospectus
supplement, the accompanying prospectus and the documents
incorporated by reference therein in their entirety before
making an investment decision. Unless otherwise indicated, this
prospectus supplement assumes no exercise of the
underwriters’ option to purchase additional shares of
Class A common stock.
Forest
City Enterprises, Inc.
Founded in 1920 and publicly traded since 1960, we are
principally engaged in the ownership, development, management
and acquisition of commercial and residential real estate
properties and land in 27 states and the District of
Columbia. At January 31, 2009, we had approximately
$11.4 billion of consolidated assets, of which
approximately $10.6 billion was invested in real estate, at
cost. Our core markets include the New York City/Philadelphia
metropolitan area, Denver, Boston, the Greater
Washington D.C./ Baltimore metropolitan area, Chicago and
the state of California. We have offices in Albuquerque, Boston,
Chicago, Denver, London (England), Los Angeles, New York City,
San Francisco and Washington, D.C., and our corporate
headquarters are in Cleveland, Ohio. Our portfolio of real
estate assets is diversified both geographically and among
property types.
We operate our business through three primary strategic business
units:
•
Commercial Group, our largest business unit, owns, develops,
acquires and operates regional malls, specialty/urban retail
centers, office and life science buildings, hotels and mixed-use
projects.
•
Residential Group owns, develops, acquires and operates
residential rental properties, including upscale and
middle-market apartments and adaptive re-use developments. It
also develops for-sale condominium projects and owns interests
in entities that develop and manage military family housing.
•
Land Development Group acquires and sells both land and
developed lots to residential, commercial and industrial
customers. It also owns and develops land into master-planned
communities and mixed-use projects.
We are incorporated in the State of Ohio. Our principal
executive offices are located at the Terminal Tower,
50 Public Square, Suite 1100, Cleveland, Ohio
44113-2203
and our telephone number is
(216) 621-6060.
Recent
Developments
First
Quarter 2009 Results
We are currently in the process of completing our first quarter
unaudited financial statements and preparing to file our
Quarterly Report on
Form 10-Q
for the quarter ended April 30, 2009 with the Securities
and Exchange Commission on or about June 8, 2009. We expect
our Earnings Before Depreciation, Amortization and Deferred
Taxes (EBDT) for the quarter ended April 30, 2009 to be
between $39.6 million and $41.6 million, or
approximately $0.37 to $0.39 per diluted common share, compared
with $16.0 million, or $0.15 per diluted common share, for
the quarter ended April 30, 2008. Included in EBDT are
development project write-offs that are expected to be
approximately $14.4 million for the quarter ended
April 30, 2009, compared with $26.7 million in the
first quarter of 2008.
We also expect an increase in impairment charges of
$10.7 million for the quarter ended April 30, 2009,
compared with no impairments in the first quarter of 2008.
EBDT and EBDT per share are non-Generally Accepted Accounting
Principle (GAAP) financial measures. A reconciliation of
estimated net loss (the most directly comparable GAAP measure to
EBDT) to expected EBDT is provided in the table below.
Reconciliation of Net Loss to Earnings Before Depreciation,
Amortization and Deferred Taxes (EBDT)(1):
Net loss attributable to Forest City Enterprises, Inc.
$
(30,683
)
$
(40,402
)
Depreciation and amortization — Real Estate Groups
72,128
70,810
Amortization of mortgage procurement costs — Real
Estate Groups
4,022
3,343
Deferred income tax expense — Real Estate Groups
(11,598
)
(15,419
)
Deferred income tax expense — Non-Real Estate Groups:
Gain on disposition of other investments
—
58
Current income tax expense on non-operating earnings:
Gain on disposition included in discontinued operations
3,785
—
Gain on disposition of unconsolidated entities
—
632
Straight-line rent adjustment
(2,775
)
(3,147
)
Preference payment
585
936
Impairment of real estate
1,124
—
Impairment of unconsolidated entities
9,560
—
Gain on disposition of unconsolidated entities
—
(881
)
Gain on disposition of other investments
—
(150
)
Discontinued operations:
Gain on disposition of rental properties
(4,548
)
—
Retrospective impact of FSP
14-1
—
174
Earnings Before Depreciation, Amortization and Deferred Taxes
(EBDT)(1)
$
41,600
$
15,954
Diluted Earnings per Common Share:
Earnings Before Depreciation, Amortization and Deferred Taxes
(EBDT)(1)
$
0.39
$
0.15
Diluted weighted average shares outstanding
106,606,318
107,230,646
(1)
We use an additional measure, EBDT, along with net earnings
(loss), to report our operating results. This measure is not a
measure of operating results as defined by generally accepted
accounting principles and may not be directly comparable to
similarly-titled measures reported by other companies. We
believe that EBDT provides additional information about our
operations, and along with net earnings (loss), is necessary to
understand our operating results. EBDT is defined as net
earnings (loss) excluding the following items: i) gain
(loss) on disposition of operating properties, divisions and
other investments (net of tax); ii) the adjustment to
recognize rental revenues and rental expense using the
straight-line method; iii) non-cash charges for real estate
depreciation, amortization (including amortization of mortgage
procurement costs) and deferred income taxes; iv) preferred
payment classified as noncontrolling interest expense on our
Consolidated Statement of Operations; v) impairment of real
estate (net of tax); vi) extraordinary items (net of tax);
and vii) cumulative effect of change in accounting
principle (net of tax).
Fiscal 2009 first-quarter comparable average occupancies were
90.1 percent in both residential and retail, and
90.4 percent in office.
Overall comparable property net operating income (NOI) increased
0.3 percent in the quarter ended April 30, 2009
compared with the prior year, with decreases of 1.8 percent
in residential and 1.0 percent in retail and an increase of
4.4 percent in office. Comparable property NOI, defined as
NOI from properties operated in both 2009 and 2008, is a
non-GAAP financial measure, and is based on the pro-rata
consolidation method, also a non-GAAP financial measure.
Included below is a schedule that presents comparable property
NOI on the full consolidation and the pro-rata consolidation
method. This is followed by a reconciliation of NOI to the most
comparable GAAP measure, net loss.
Comparable
Net Operating Income (NOI) (% change over same period, prior
year)
(b) Depreciation and amortization — Non-Real
Estate
3,452
—
7,158
—
10,610
3,319
—
10,611
—
13,930
Total depreciation and amortization
$
66,458
$
1,407
$
17,580
$
107
$
82,738
$
66,006
$
983
$
19,054
$
663
$
84,740
(c) Amortization of mortgage procurement costs —
Real Estate Groups
$
3,671
$
160
$
506
$
5
$
4,022
$
2,852
$
152
$
546
$
97
$
3,343
(d) Amortization of mortgage procurement costs —
Non-Real Estate
—
—
120
—
120
—
—
45
—
45
Total amortization of mortgage procurement costs
$
3,671
$
160
$
626
$
5
$
4,142
$
2,852
$
152
$
591
$
97
$
3,388
2009 Debt
Maturities and Recent Financing Activity
As of January 31, 2009, we had total debt of
$917.8 million at our pro-rata share ($826.6 million
at full consolidation) maturing in fiscal 2009, inclusive of
notes payable of $26.5 million ($14.8 million at full
consolidation) and exclusive of scheduled amortization payments.
Since January 31, 2009, we have addressed
$408.0 million ($414.1 million at full consolidation)
of this total amount, $252.0 million ($284.8 million
at full consolidation) through closed loans and
$156.0 million ($129.3 million at full consolidation)
through committed financings. We are currently negotiating the
refinancing or extension of the remaining $509.8 million
($412.5 million at full consolidation) of 2009 debt
maturities.
In addition to the $408.0 million of 2009 debt maturities
mentioned above that have already been addressed, we have also
repaid $21.0 million (at pro-rata and full consolidation)
of a loan that matures in 2011 associated with an asset
disposition, and closed $9.3 million ($0.0 at full
consolidation) of additional loans that mature in future years.
We are currently in negotiations with lenders to extend our
$750 million revolving credit facility, which matures in
March 2010. While the ultimate outcome of these negotiations
cannot be predicted, we anticipate that the extension will
result in a reduced commitment from our lenders, increased
borrowing costs and modifications to the financial covenants.
Asset
Dispositions
In the first quarter of 2009, we sold a condominium development
opportunity located in Mamaroneck, New York, to a developer in a
transaction that generated $14.0 million in proceeds. In
addition, we recently announced that we completed the sale of
The Shops at Grand Avenue, a 100,000-square-foot retail
center in Queens, New York, to an affiliate of AEW Capital
Management, LP for $33.5 million in a transaction that
generated net proceeds of $9.4 million.
We have received proposals and are in active negotiations on
sales or joint ventures of approximately $1.3 billion of
assets, representing net after-tax proceeds of approximately
$180 million. We anticipate that we will continue to pursue
additional asset sales or joint ventures over the 2009-2012
period. To date, we have not entered into any definitive
agreements and we can give no assurance that these asset sales
or joint ventures will occur. In addition, we expect additional
proceeds of $38 million in 2009 from the sale of tax
credits under contract.
Anticipated
Equity Investments through 2012
We anticipate investing approximately $169 million of
equity to satisfy existing completion guaranty obligations on
eight projects under construction as of January 31, 2009.
In addition, although we do not anticipate commencing any new
vertical development in the near term, we do anticipate
potential capital needs related to existing development
opportunities and the preservation of entitlements on a number
of long-term projects of approximately $331 million over
the course of the next four years.
Unless otherwise indicated, all information in this prospectus
supplement assumes that the underwriters do not exercise their
option to purchase additional shares of Class A common
stock.
Class A common stock offered by us
40,000,000 shares
Class A common stock to be outstanding after this offering
120,289,745 shares(1)
Option to purchase additional shares of Class A common stock
We have granted the underwriters an option to purchase up to
6,000,000 additional shares of our Class A common stock.
(1)
Based on 80,289,745 shares of our Class A common stock
outstanding at April 30, 2009. Excludes shares of our
Class A common stock issuable under our 1994 Stock Plan,
including 4,079,382 shares of our Class A common stock
issuable upon the exercise of outstanding stock options at a
weighted average exercise price of $38.40, 1,101,625 shares
of unvested restricted stock, 172,609 contingently issuable
shares (performance shares) and 2,197,513 shares available
for future grants. Also excludes 3,646,755 shares of our
Class A common stock issuable upon the conversion of
Class A Common Units and excludes any shares of our
Class A common stock issuable upon a put of our 3.625%
puttable equity-linked senior notes due 2011.
Investing in shares of our Class A common stock involves
risks. You should carefully consider the following risk factors
and the risk factors included in our Annual Report on
Form 10-K
for the year ended January 31, 2009, in addition to all
other information contained in this prospectus supplement and
the accompanying prospectus and incorporated by reference into
the accompanying prospectus before deciding to invest in shares
of our Class A common stock. The risks and uncertainties
below and in our Annual Report on
Form 10-K
for the year ended January 31, 2009 are not the only ones
facing us. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may become
important factors that affect us. If any of such risks or the
risks described below and in our Annual Report on
Form 10-K
for the year ended January 31, 2009 occur, our business,
financial condition or results of operations could be materially
and adversely affected.
Risks
Related to Our Business
In the
“Market Conditions May Negatively Impact Our Liquidity and
Our Ability to Finance or Refinance Projects or Repay Our
Debt” risk factor in our Annual Report on
Form 10-K,
we disclosed our total outstanding long-term debt that becomes
due in fiscal 2009, non-recourse mortgage debt that was past due
or in default as of January 31, 2009 and our access to
liquidity through our $750 million revolving credit facility.
The following updates that information as of April 30,2009.
As of April 30, 2009, we have $412.5 million of
outstanding long-term debt that matures in fiscal 2009. We have
conditional options to extend $355.3 million of these
maturities and are negotiating with lenders regarding the
remaining maturities. The terms of the conditional options vary
from loan to loan, but generally could include the satisfaction
of pre-determined underwriting qualifications such as financial
or operational covenants. While we are actively trying to
satisfy the conditional options and negotiate with the lenders
to address all remaining 2009 maturities, we cannot assure you
that we will be successful.
At April 30, 2009, we have three non-recourse mortgages
amounting to $31.1 million that have matured and are
currently past due. If we are unable to negotiate an extension
or refinancing of the mortgages, the lender could commence
foreclosure proceedings and we could lose the properties. Five
of our joint ventures accounted for under the equity method of
accounting have non-recourse mortgages that are past due or in
default at April 30, 2009. If we are unable to negotiate an
extension or refinancing or cure the default on those mortgages,
the lender could commence foreclosure proceedings and we could
lose our investment in the projects amounting to
$11.8 million. Under the terms of four of the eight loans
that are past due or in default, we have guaranteed the lender
the lien free completion of certain horizontal infrastructure
associated with those land development projects. The maximum
amount due by Forest City and its partners under these
completion guarantees is approximately $30.5 million. This
guaranty is recourse to us and the lender could enforce the
completion guaranty which would have an adverse affect on our
cash flows. While we are actively negotiating with the lenders
to resolve these past due loans and completion guarantees, we
cannot assure you that we will be successful.
We are currently in negotiations with our lenders to extend our
$750 million revolving credit facility, which matures in
March 2010, although we have not agreed to definitive terms.
While we cannot predict the outcome of these negotiations, we
anticipate that any extension of the facility will result in
reduced commitment from our lenders, increased borrowing costs
and modification to the financial covenants. We cannot assure
you, however, that we will be able to obtain an extension or
renewal of the facility on favorable terms or at all, which
would materially adversely affect our liquidity and financial
position.
In the
“We are Subject to Real Estate Development Risks” risk
factor in our Annual Report on
Form 10-K
we disclosed risks associated with our Brooklyn Atlantic Yards
project. The following updates that risk factor to provide
additional information.
Brooklyn Atlantic Yards. We are in the process
of developing Brooklyn Atlantic Yards, an approximately
$4.0 billion long-term mixed-use project in downtown
Brooklyn expected to feature a state of the art sports and
entertainment arena for the Nets basketball team, a franchise of
the NBA. The acquisition and development of Brooklyn Atlantic
Yards has been formally approved by the required state
governmental authorities but final documentation of the
transactions is subject to the completion of negotiations with
local
and state governmental authorities, including negotiation of the
applicable development documentation and public subsidies.
Pre-construction activities have commenced for the potential
removal, remediation or other activities to address
environmental contamination at, on, under or emanating to or
from the land. There is also one lawsuit pending challenging the
use of eminent domain which may not be resolved in our favor
resulting in Brooklyn Atlantic Yards not being developed at all
or not being developed with the features we anticipate. As a
result of the foregoing, this project has experienced delays and
may continue to experience further delays. There is also the
potential for increased costs and further delays to the project
as a result of (i) increasing construction costs,
(ii) scarcity of labor and supplies, (iii) our
inability to obtain tax-exempt financing or the availability of
financing or public subsidies, or our inability to retain the
current land acquisition financing, (iv) our or our
partners’ inability or failure to meet required equity
contributions, (v) increasing rates for financings,
(vi) loss of arena sponsorships and related revenues,
(vii) our inability to meet certain agreed upon deadlines
for the development of the project and (viii) other
potential litigation seeking to enjoin or prevent the project or
litigation for which there may not be insurance coverage. The
development of Brooklyn Atlantic Yards is being done in
connection with the proposed move of the Nets to the planned
arena. The arena itself (and its plans) along with any movement
of the team is subject to approval by the NBA, which we may not
receive.
If any of the foregoing risks were to occur we may: (i) not
be able to develop Brooklyn Atlantic Yards to the extent
intended or at all resulting in a potential write off of our
investment, (ii) be required to repay the City
and/or State
of New York amounts previously advanced under public subsidies,
plus penalties if applicable, (iii) be in default of our
non-recourse mortgages on the project, and (iv) be required
to restore the rail yards that previously existed on the land.
The costs associated with those events could be significant and
could have a material adverse effect on our business, cash flows
and results of operations. Even if we are able to continue with
the development, or a portion thereof, we would likely not be
able to do so as quickly as originally planned, would be likely
to incur additional costs and may need to write-off a portion of
the development.
First
Quarter Results
We have included in this prospectus supplement estimates of our
results of operations from our first fiscal quarter ended
April 30, 2009. These estimates are based on the work we
have performed to date in preparing our unaudited financial
statements for our first fiscal quarter, which will be filed
with our Quarterly Report on
Form 10-Q
on or about June 8, 2009. Our first quarter financial
statements are still being prepared, and it is possible that in
performing additional work and procedures to complete these
financial statements, adjustments or changes may be made to
these estimates. We cannot assure you that there will not be
adjustments or changes to these estimates, and these adjustments
or changes could be material.
Risks
Related to Shares of Our Class A Common Stock and this
Offering
Our
management has significant flexibility in using the net proceeds
of this offering.
We intend to use the net proceeds from this offering to reduce
outstanding borrowings under our $750 million revolving
credit facility. The additional liquidity under our
$750 million revolving credit facility after application of
the net proceeds will be available for general corporate
purposes. Therefore, our management will have significant
flexibility in applying the net proceeds of this offering that
remain unused, if any, after we reduce outstanding borrowings
under our $750 million revolving credit facility and using
the additional liquidity created by the reduction in borrowings.
The actual amounts and timing of expenditures will vary
significantly depending on a number of factors such as our
ability to sell assets, future equity investment needs and other
corporate debt obligations. Management’s failure to use
these funds effectively would have an adverse effect on our
business, financial results and the value of our Class A
common stock, and could make it more difficult and costly for us
to raise funds in the future.
We may
change the dividend policy for our common shares in the
future.
In our fiscal year ended January 31, 2009, our Board of
Directors declared three quarterly common share dividends of
$0.08 per share. On December 5, 2008, our Board of
Directors suspended the cash dividends on shares of our
Class A and Class B common stock until further notice.
Our $750 million
revolving credit facility, as amended on January 30, 2009,
prohibits us from paying any dividends on our capital stock
through March 2010.
The decision to declare and pay dividends on our common shares
after March 2010, as well as the timing, amount and composition
of any such future dividends, will be at the sole discretion of
our Board of Directors and will depend on our earnings, EBDT,
liquidity, financial condition, capital requirements,
contractual prohibitions or other limitations under our
indebtedness, state law and such other factors as our Board of
Directors deems relevant. No assurance can be given as to when
or if our Board of Directors may decide to commence paying
dividends again.
Our
shareholders will experience dilution as a result of this
offering and we may engage in future equity and equity-related
offerings that may be further dilutive of our common
shares.
Giving effect to the issuance of Class A common shares in
this offering, the receipt of the expected net proceeds and the
use of those proceeds, we expect that this offering will have a
dilutive effect on our expected earnings per share for the year
ending January 31, 2010. The actual amount of such dilution
cannot be determined at this time and will be based on numerous
factors. Additionally, subject to the
60-day
lock-up restrictions described in “Underwriting,” we
are not restricted from issuing additional Class A common
shares or preferred shares, including any securities that are
convertible into or exchangeable for, or that represent the
right to receive, Class A common shares or preferred shares
or any substantially similar securities. In most circumstances,
shareholders will not be entitled to vote on whether or not we
issue additional Class A common shares. The market price of
our Class A common shares could decline as a result of
sales of a large number of shares of our Class A common
stock in the market after this offering or the perception that
such sales could occur.
We have included or incorporated by reference in this prospectus
supplement or the accompanying prospectus statements that
constitute “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements reflect our current views with
respect to financial results related to future events and are
based on assumptions and expectations that may not be realized
and are inherently subject to risks and uncertainties, many of
which cannot be predicted with accuracy and some of which might
not even be anticipated. Future events and actual results,
financial or otherwise, may differ from the results discussed in
the forward-looking statements.
See “Risk Factors” in this prospectus supplement and
the risk factors beginning on Page 4 of our Annual Report
on
Form 10-K
for the year ended January 31, 2009 for information
regarding some of the important factors that could cause actual
results to differ, perhaps materially, from those in our
forward-looking statements.
We have no obligation to revise or update any forward-looking
statements, other than imposed by law, as a result of future
events or new information. Readers are cautioned not to place
undue reliance on such forward-looking statements.
We estimate the net proceeds we will receive from this offering
to be approximately $303.4 million, assuming a public
offering price of $7.93 per share (the last reported sales
price of our Class A common stock on the NYSE on
May 12, 2009) or approximately $349.0 million if the
underwriters exercise their option to purchase additional shares
from us in full, after deducting the underwriting discount and
the estimated offering expenses payable by us.
We intend to use the net proceeds from this offering to reduce
the outstanding borrowings under our $750 million revolving
credit facility and, if proceeds remain, for general corporate
purposes. The additional liquidity under our $750 million
revolving credit facility after application of the net proceeds
will also be available for general corporate purposes. An
affiliate of Merrill Lynch & Co. is the documentation
agent for our $750 million revolving credit facility. Our
revolving credit facility had an outstanding balance of
$358 million as of May 12, 2009, bears interest at our
option at either (1) LIBOR-based rate plus 2.50% (which
equals 3.06% at May 12, 2009), or (2) a Prime-based
rate plus 1.50% and is scheduled to mature in March 2010.
Pending application of the net proceeds as described above, we
intend to invest the net proceeds of this offering in
short-term, investment-grade, interest-bearing securities.
Our shares of Class A common stock are traded on the NYSE
under the symbol “FCEA”. The following table
summarizes the quarterly high and low sales prices per share of
our Class A common stock as reported by the NYSE and the
dividends declared per Class A common share:
As of April 30, 2009, there were approximately
726 holders of record of our Class A common stock. On
May 12, 2009, the last reported sale price for the
Class A common stock as reported by the NYSE was $7.93.
On December 5, 2008, our Board of Directors suspended the
cash dividends on shares of Class A and Class B common
stock following the payment of dividends on December 15,2008, until such dividends are reinstated. Our $750 million
revolving credit facility, as amended January 30, 2009,
prohibits us from paying any dividends on our capital stock
through March 2010. No assurance can be given when or if our
Board of Directors may decide to commence paying dividends again.
The following table shows our capitalization as of
January 31, 2009 and on an adjusted basis to give effect to
(a) the application of $303.4 million of estimated net
proceeds from this offering as described in “Use of
Proceeds”’ above, assuming the sale of
40,000,000 shares of Class A common stock in this
offering, at a public offering per share price of $7.93 per
share (the last reported sale price for the Class A common stock
as reported by the NYSE on May 12, 2009), after deducting
the underwriting discount and estimated offering expenses of
$13.8 million we expect to pay and (b) the net
repayment of $7.5 million under our revolving credit
facility from January 31, 2009 through May 12, 2009.
You should read this table in conjunction with the information
set forth under “Use of Proceeds” and the consolidated
financial statements and notes thereto incorporated by reference
into the accompanying prospectus.
3.625% puttable equity-linked senior notes due 2011
272,500
272,500
7.625% senior notes due 2015
300,000
300,000
6.500% senior notes due 2017
150,000
150,000
7.375% senior notes due 2034
100,000
100,000
Subordinated debt
47,910
47,910
Total debt, including current portion
8,314,300
8,003,412
Shareholders’ equity
Preferred stock — convertible, without par value;
10,000,000 shares authorized; no shares issued
—
—
Common stock —
$.331/3
par value
Class A, 271,000,000 shares authorized;
80,082,126 shares issued and 80,080,262 outstanding, actual
and 120,082,126 shares issued and 120,080,262 outstanding,
as adjusted(2)
26,694
40,014
Class B, convertible, 56,000,000 authorized;
22,798,025 shares issued and outstanding actual, and as
adjusted
7,599
7,599
Additional paid-in capital(3)
241,539
531,607
Retained earnings
645,852
645,852
Less treasury stock, at cost; 1,864 shares, actual and as
adjusted
(21
)
(21
)
Accumulated other comprehensive loss
(107,521
)
(107,521
)
Total shareholders’ equity
814,142
1,117,530
Total capitalization
$
9,128,442
$
9,120,942
(1)
From January 31, 2009 through May 12, 2009, we have
decreased borrowings under our $750 million revolving
credit facility by $7.5 million to $358 million.
Giving effect to the application of the estimated net proceeds
of this offering, we assume a repayment of borrowings of
$303.4 million under our revolving credit facility.
(2)
Excludes shares of our Class A common stock issuable under
our 1994 Stock Plan, including 4,079,382 Class A common
shares issuable upon the exercise of outstanding stock options
at a weighted average exercise price of $38.40,
1,101,625 shares of unvested restricted stock, 172,609
contingently issuable shares (performance shares), and
2,197,513 shares available for future grants. Also excludes
3,646,755 shares of our Class A common stock issuable
upon the conversion of Class A Common Units and excludes
any shares of our Class A common stock issuable upon a put
of our 3.625% puttable equity-linked senior notes due 2011.
(3)
The “As Adjusted” column reflects approximately
$13.8 million of transaction costs.
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Goldman, Sachs & Co. and Morgan Stanley &
Co. Incorporated are acting as representatives of each of the
underwriters named below. Subject to the terms and conditions
set forth in an underwriting agreement among us and the
underwriters, we have agreed to sell to the underwriters, and
each of the underwriters has agreed, severally and not jointly,
to purchase from us, the number of shares of Class A common
stock set forth opposite its name below.
Number
Underwriter
of Shares
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
Total
40,000,000
Subject to the terms and conditions set forth in the
underwriting agreement, the underwriters have agreed, severally
and not jointly, to purchase all of the shares sold under the
underwriting agreement if any of these shares are purchased. If
an underwriter defaults, the underwriting agreement provides
that the purchase commitments of the non-defaulting underwriters
may be increased or the underwriting agreement may be terminated.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or
to contribute to payments the underwriters may be required to
make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale,
when, as and if issued to and accepted by them, subject to
conditions contained in the underwriting agreement, such as the
receipt by the underwriters of officer’s certificates and
legal opinions. The underwriters reserve the right to withdraw,
cancel or modify offers to the public and to reject orders in
whole or in part.
Commissions
and Discounts
The representatives have advised us that the underwriters
propose initially to offer the shares to the public at the
public offering price set forth on the cover page of this
prospectus and to dealers at that price less a concession not in
excess of $ per share. The
underwriters may allow, and the dealers may reallow, a discount
not in excess of $ per share to
other dealers. After the initial offering, the public offering
price, concession or any other term of the offering may be
changed.
The following table shows the public offering price,
underwriting discount and proceeds before expenses to us. The
information assumes either no exercise or full exercise by the
underwriters of their over-allotment option. The underwriters
will receive no discount with respect to 800,000 of the shares
of Class A common stock reserved for sale by us to certain
of our affiliates, as described below.
We have granted an option to the underwriters to purchase up to
6,000,000 additional shares at the public offering price, less
the underwriting discount. The underwriters may exercise this
option for 30 days from the date of this prospectus solely
to cover any overallotments. If the underwriters exercise this
option, each will be obligated, subject to conditions contained
in the underwriting agreement, to purchase a number of
additional shares proportionate to that underwriter’s
initial amount reflected in the above table.
Reserved
Shares
The underwriters have reserved for sale by us 800,000 of the
shares of our Class A common stock offered by this
prospectus supplement for members of the Ratner and Miller
families, including certain executive officers and members of
our current board of directors, at the public offering price
less the underwriting discount. The Ratner and Miller families,
together with the Shafran family, have a controlling ownership
interest in the Company. In addition, the underwriters have
reserved for sale at the public offering price up to 1,870,000
additional shares of our Class A common stock offered by
this prospectus supplement to these persons. The number of
shares of Class A common stock available for sale to the
general public will be reduced to the extent such persons
purchase these reserved shares. Each of these persons has
entered into a
lock-up
agreement, as described below.
No Sales
of Similar Securities
We, our executive officers and directors have agreed not to sell
or transfer any shares of any class of our common stock or
securities convertible into, exchangeable for, exercisable for,
or repayable with any shares of any class of our common stock,
for 60 days after the date of this prospectus without first
obtaining the written consent of the representatives.
Specifically, we and these other persons have agreed, with
certain limited exceptions, not to directly or indirectly
•
offer, pledge, sell or contract to sell any shares of any class
of our common stock,
•
sell any option or contract to purchase any shares of any class
of our common stock,
•
purchase any option or contract to sell any shares of any class
of our common stock,
•
grant any option, right or warrant for the sale of any shares of
any class of our common stock,
•
lend or otherwise dispose of or transfer any shares of any class
of our common stock,
•
request or demand that we file a registration statement related
to any shares of any class of our common stock, or
•
enter into any swap or other agreement that transfers, in whole
or in part, the economic consequence of ownership of any shares
of any class of our common stock whether any such swap or
transaction is to be settled by delivery of shares or other
securities, in cash or otherwise.
This lock-up
provision applies to shares of any class of our common stock and
to securities convertible into or exchangeable or exercisable
for shares of any class of our common stock. It also applies to
shares of any class of our common stock owned now or acquired
later by the person executing the agreement or for which the
person executing the agreement later acquires the power of
disposition.
New York
Stock Exchange Listing
The shares of Class A common stock are listed on the New
York Stock Exchange under the symbol “FCEA.”
Because more than ten percent of the net proceeds of the
offering may be paid to members or affiliates of members of the
Financial Industry Regulatory Authority, Inc. participating in
the offering, the offering will be conducted in accordance with
FINRA Rule 5110(h) and NASD Rule 2720(c)(3).
Price
Stabilization, Short Positions
Until the distribution of the shares is completed, SEC rules may
limit underwriters and selling group members from bidding for
and purchasing our Class A common stock. However, the
representatives may engage in transactions that stabilize the
price of the Class A common stock, such as bids or
purchases to peg, fix or maintain that price.
In connection with the offering, the underwriters may purchase
and sell our Class A common stock in the open market. These
transactions may include short sales, purchases on the open
market to cover positions created by short sales and stabilizing
transactions. Short sales involve the sale by the underwriters
of a greater number of shares than they are required to purchase
in the offering. “Covered” short sales are sales made
in an amount not greater than the underwriters’ option to
purchase additional shares in the offering. The underwriters may
close out any covered short position by either exercising their
overallotment option or purchasing shares in the open market. In
determining the source of shares to close out the covered short
position, the underwriters will consider, among other things,
the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through
the overallotment option. “Naked” short sales are
sales in excess of the overallotment option. The underwriters
must close out any naked short position by purchasing shares in
the open market. A naked short position is more likely to be
created if the underwriters are concerned that there may be
downward pressure on the price of our Class A common stock
in the open market after pricing that could adversely affect
investors who purchase in the offering. Stabilizing transactions
consist of various bids for or purchases of shares of
Class A common stock made by the underwriters in the open
market prior to the completion of the offering.
Similar to other purchase transactions, the underwriters’
purchases to cover the syndicate short sales may have the effect
of raising or maintaining the market price of our Class A
common stock or preventing or retarding a decline in the market
price of our Class A common stock. As a result, the price
of our Class A common stock may be higher than the price
that might otherwise exist in the open market.
Neither we nor any of the underwriters make any representation
or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of
our Class A common stock. In addition, neither we nor any
of the underwriters make any representation that the
representatives will engage in these transactions or that these
transactions, once commenced, will not be discontinued without
notice.
Electronic
Offer, Sale and Distribution of Shares
In connection with the offering, certain of the underwriters or
securities dealers may distribute prospectuses by electronic
means, such as
e-mail. In
addition, Merrill Lynch may facilitate Internet distribution for
this offering to certain of its Internet subscription customers.
Merrill Lynch may allocate a limited number of shares for sale
to its online brokerage customers. An electronic prospectus is
available on the Internet web site maintained by Merrill Lynch,
Pierce, Fenner & Smith Incorporated. Other than the
prospectus in electronic format, the information on the Merrill
Lynch, Pierce, Fenner & Smith Incorporated web site is not
part of this prospectus.
Other
Relationships
Some of the underwriters and their affiliates have engaged in,
and may in the future engage in, investment banking and other
commercial dealings in the ordinary course of business with us
or our affiliates.
They have received, or may in the future receive, customary fees
and commissions for these transactions. An affiliate of Merrill
Lynch, Pierce, Fenner & Smith Incorporated is the
documentation agent and a lender for our $750 million
revolving credit facility and serves as the administrative agent
in more than $845 million of the construction financings
entered into by our affiliates. Goldman, Sachs & Co.
leases space from us in the ordinary course of its business.
Morgan Stanley & Co. Incorporated beneficially owns
approximately 7.5 million shares of our Class A common
stock, which includes shares owned both directly and through one
of its affiliates.
Notice to
Prospective Investors in the EEA
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
“Relevant Member State”) an offer to the public of any
shares which are the subject of the offering contemplated by
this prospectus may not be made in that Relevant Member State,
except that an offer to the public in that Relevant Member State
of any shares may be made at any time under the following
exemptions under the Prospectus Directive, if they have been
implemented in that Relevant Member State:
(a) to legal entities which are authorized or regulated to
operate in the financial markets or, if not so authorized or
regulated, whose corporate purpose is solely to invest in
securities;
(b) to any legal entity which has two or more of
(1) an average of at least 250 employees during the
last financial year; (2) a total balance sheet of more than
€43,000,000 and (3) an annual net turnover of more
than €50,000,000, as shown in its last annual or
consolidated accounts;
(c) by the underwriters to fewer than 100 natural or legal
persons (other than “qualified investors” as defined
in the Prospectus Directive) subject to obtaining the prior
consent of the representatives for any such offer; or
(d) in any other circumstances falling within
Article 3(2) of the Prospectus Directive;
provided that no such offer of shares shall result in a
requirement for the publication by us or any representative of a
prospectus pursuant to Article 3 of the Prospectus
Directive.
Any person making or intending to make any offer of shares
within the EEA should only do so in circumstances in which no
obligation arises for us or any of the underwriters to produce a
prospectus for such offer. Neither we nor the underwriters have
authorized, nor do they authorize, the making of any offer of
shares through any financial intermediary, other than offers
made by the underwriters which constitute the final offering of
shares contemplated in this prospectus.
For the purposes of this provision, and your representation
below, the expression an “offer to the public” in
relation to any shares in any Relevant Member State means the
communication in any form and by any means of sufficient
information on the terms of the offer and any shares to be
offered so as to enable an investor to decide to purchase any
shares, as the same may be varied in that Relevant Member State
by any measure implementing the Prospectus Directive in that
Relevant Member State and the expression “Prospectus
Directive” means Directive 2003/71/EC and includes any
relevant implementing measure in each Relevant Member State.
Each person in a Relevant Member State who receives any
communication in respect of, or who acquires any shares under,
the offer of shares contemplated by this prospectus will be
deemed to have represented, warranted and agreed to and with us
and each underwriter that:
(a) it is a “qualified investor” within the
meaning of the law in that Relevant Member State implementing
Article 2(1)(e) of the Prospectus Directive; and
(b) in the case of any shares acquired by it as a financial
intermediary, as that term is used in Article 3(2) of the
Prospectus Directive, (i) the shares acquired by it in the
offering have not been
acquired on behalf of, nor have they been acquired with a view
to their offer or resale to, persons in any Relevant Member
State other than “qualified investors” (as defined in
the Prospectus Directive), or in circumstances in which the
prior consent of the representatives has been given to the offer
or resale; or (ii) where shares have been acquired by it on
behalf of persons in any Relevant Member State other than
qualified investors, the offer of those shares to it is not
treated under the Prospectus Directive as having been made to
such persons.
Notice to
Prospective Investors in Switzerland
This document, as well as any other material relating to the
shares which are the subject of the offering contemplated by
this prospectus, do not constitute an issue prospectus pursuant
to Article 652a of the Swiss Code of Obligations. The
shares will not be listed on the SWX Swiss Exchange and,
therefore, the documents relating to the shares, including, but
not limited to, this document, do not claim to comply with the
disclosure standards of the listing rules of SWX Swiss Exchange
and corresponding prospectus schemes annexed to the listing
rules of the SWX Swiss Exchange. The shares are being offered in
Switzerland by way of a private placement, i.e. to a
small number of selected investors only, without any public
offer and only to investors who do not purchase the shares with
the intention to distribute them to the public. The investors
will be individually approached by us from time to time. This
document, as well as any other material relating to the shares,
is personal and confidential and do not constitute an offer to
any other person. This document may only be used by those
investors to whom it has been handed out in connection with the
offering described herein and may neither directly nor
indirectly be distributed or made available to other persons
without our express consent. It may not be used in connection
with any other offer and shall in particular not be copied
and/or
distributed to the public in (or from) Switzerland.
Notice to
Prospective Investors in the Dubai International Financial
Centre
This document relates to an exempt offer in accordance with the
Offered Securities Rules of the Dubai Financial Services
Authority. This document is intended for distribution only to
persons of a type specified in those rules. It must not be
delivered to, or relied on by, any other person. The Dubai
Financial Services Authority has no responsibility for reviewing
or verifying any documents in connection with exempt offers. The
Dubai Financial Services Authority has not approved this
document nor taken steps to verify the information set out in
it, and has no responsibility for it. The shares which are the
subject of the offering contemplated by this prospectus may be
illiquid
and/or
subject to restrictions on their resale. Prospective purchasers
of the shares offered should conduct their own due diligence on
the shares. If you do not understand the contents of this
document you should consult an authorised financial adviser.
Certain legal matters, including the validity of the shares of
Class A common stock offered hereby, will be passed upon
for us by Thompson Hine LLP, Cleveland, Ohio. Certain legal
matters incident to the validity of the shares of Class A
common stock offered hereby will be passed upon for us by
Geralyn M. Presti, our Senior Vice President, General Counsel
and Secretary. As of April 30, 2009, Ms. Presti owned
21,599 shares of our Class A common stock, including
12,695 restricted shares, 1,238 shares of our Class B
common stock and options to purchase 57,147 shares of our
Class A common stock, of which 28,060 are currently
exercisable or exercisable within 60 days. The validity of the
Class A common stock offered hereby will be passed upon for
the underwriters by Sullivan & Cromwell LLP, New York,
New York. Sullivan & Cromwell LLP will rely as to all
matters of Ohio law upon the opinion of Thompson Hine LLP.
We file annual, quarterly, current and special reports, proxy
statements and other information with the Securities and
Exchange Commission. You may read and copy any document we file
with the Commission at the Commission’s Public Reference
Room at 100 F Street N.E., Washington, D.C.
20549. Please call the Commission at
1-800-SEC-0330
for further information on the Public Reference Room. Our SEC
filings are also available to the public from the
Commission’s Internet site at
http://www.sec.govor from our Internet site at
http://www.forestcity.net.
Our Corporate Governance Guidelines, our Code of Legal and
Ethical Conduct and our committee charters are also available on
our website at
http://www.forestcity.netor in print upon written request addressed to Corporate
Secretary, Forest City Enterprises, Inc., Terminal Tower, 50
Public Square, Suite 1100, Cleveland, Ohio44113. However,
the information on our Internet site does not constitute a part
of this prospectus supplement.
Our Class A common stock, par value
$.331/3
per share, is listed on the NYSE under the symbol
“FCEA”. You can also inspect and copy any reports,
proxy statements and other information that we file with the
Commission at the offices of the NYSE located at 20 Broad
Street, New York, NY10005.
We may offer from time to time, in one or more offerings, our
senior debt securities, senior subordinated debt securities,
junior subordinated debt securities, Class A common stock,
preferred stock, depositary shares or warrants. This prospectus
describes the general terms of these securities and the general
manner in which we may offer them.
We will provide specific terms of these securities in one or
more supplements to this prospectus. The prospectus supplements
will also describe the specific manner in which we will offer
these securities and may also supplement, update or amend
information contained in this prospectus. You should read this
prospectus and any related prospectus supplement carefully
before you invest in our securities. This prospectus may not be
used to offer and sell our securities unless accompanied by a
prospectus supplement describing the method and terms of the
offering of those securities being offered.
We may sell the securities directly, through underwriters,
dealers or agents as designated from time to time, or through a
combination of these methods. We reserve the sole right to
accept, and together with any underwriters, dealers and agents,
reserve the right to reject, in whole or in part, any proposed
purchase of securities. The names of any underwriters, dealers
or agents that are included in a sale of securities to you, and
any applicable commissions or discounts, will be stated in the
accompanying prospectus supplement. In addition, the
underwriters, if any, may over-allot a portion of the securities.
Our Class A common stock, par value
$.331/3
per share, is listed on the New York Stock Exchange under the
symbol “FCEA.” The closing price of our Class A
common stock on the New York Stock Exchange on April 29,2009 was $7.87 per share. None of the other securities that we
may offer under this prospectus are currently publicly traded.
Investing in our securities involves risks. For a discussion
of the risks you should consider before deciding to purchase
these securities, please see the section titled “Risk
Factors,” beginning on page 2 of this prospectus.
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.
References in the prospectus to “we,”“us,”“the Company” or “Forest
City” or other similar terms mean Forest City Enterprises,
Inc. and its consolidated subsidiaries, unless we state
otherwise or the context indicates otherwise.
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission (the
“Commission”) utilizing a “shelf
registration” process or continuous offering process. Under
this shelf registration process, we may, from time to time, sell
any combination of the securities described in this prospectus
in one or more offerings.
This prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will
provide a prospectus supplement containing specific information
about the terms of the securities being offered. That prospectus
supplement may include or incorporate by reference a detailed
and current discussion of any risk factors and will discuss any
special considerations applicable to those securities, including
the plan of distribution. This prospectus does not contain all
of the information included in the registration statement. For a
more complete understanding of the offering of the securities,
you should refer to the registration statement, including its
exhibits. Any prospectus supplement may also add, update or
change information in this prospectus. If there is any
inconsistency between the information in this prospectus and any
prospectus supplement, you should rely on the information in
that prospectus supplement. You should read both this prospectus
and any prospectus supplement together with additional
information described under “Where You Can Find More
Information” and “Incorporation of Certain Information
by Reference.”
This prospectus contains summaries of certain provisions
contained in some of the documents described herein, but please
refer to the actual documents for complete information. All of
the summaries are qualified in their entirety by reference to
the actual documents. Copies of some of the documents referred
to herein have been filed or will be filed or incorporated by
reference as exhibits to the registration statement of which
this prospectus is a part, and you may obtain copies of those
documents as described below in the section titled “Where
You Can Find More Information.”
You should rely only on the information contained or
incorporated by reference in this prospectus and in any
prospectus supplement. Neither we, nor any underwriters, dealers
or agents, have authorized anyone to provide you with different
information. We are not offering the securities in any state
where the offering is prohibited. You should not assume that the
information in this prospectus, any prospectus supplement, or
any document incorporated by reference, is truthful or complete
at any date other than the date mentioned on the cover page of
those documents.
Founded in 1920 and publicly traded since 1960, we are
principally engaged in the ownership, development, management
and acquisition of commercial and residential real estate and
land in 27 states and the District of Columbia. At
January 31, 2009, we had approximately $11.4 billion
of consolidated assets, of which approximately
$10.6 billion was invested in real estate, at cost. Our
core markets include the New York City/Philadelphia metropolitan
area, Denver, Boston, the Greater Washington
D.C./Baltimore
metropolitan area, Chicago and the state of California. We have
offices in Albuquerque, Boston, Chicago, Denver, London
(England), Los Angeles, New York City, San Francisco and
Washington, D.C., and our corporate headquarters are in
Cleveland, Ohio. Our portfolio of real estate assets is
diversified both geographically and among property types.
We operate our business through three primary strategic business
units:
•
Commercial Group, our largest business unit, owns, develops,
acquires and operates regional malls, specialty/urban retail
centers, office and life science buildings, hotels and mixed-use
projects.
•
Residential Group owns, develops, acquires and operates
residential rental properties, including upscale and
middle-market apartments and adaptive re-use developments.
Additionally, it develops for-sale condominium projects and also
owns interests in entities that develop and manage military
family housing.
Land Development Group acquires and sells both land and
developed lots to residential, commercial and industrial
customers. It also owns and develops land into master-planned
communities and mixed-use projects.
We are incorporated in the State of Ohio. Our principal
executive offices are located at the Terminal Tower,
50 Public Square, Suite 1100, Cleveland, Ohio
44113-2203
and our telephone number is
(216) 621-6060.
Before you purchase securities offered pursuant to this
prospectus, you should be aware of various risks, including but
not limited to those discussed in the section titled
“Item 1A. Risk Factors” beginning on page 4
of our Annual Report on
Form 10-K
for the year ended January 31, 2009, as may be further
updated and modified periodically in our reports filed with the
Commission. See “Incorporation of Certain Information by
Reference” for more information on these reports. You
should carefully consider these risk factors together with all
other information in this prospectus and the applicable
prospectus supplement before you decide to invest in the
securities.
We have included or incorporated by reference in this prospectus
or may include or incorporate by reference in an accompanying
prospectus supplement statements that constitute
“forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995.
These forward-looking statements reflect our current views with
respect to financial results related to future events and are
based on assumptions and expectations that may not be realized
and are inherently subject to risks and uncertainties, many of
which cannot be predicted with accuracy and some of which might
not even be anticipated. Future events and actual results,
financial or otherwise, may differ from the results discussed in
the forward-looking statements.
See “Risk Factors” for information regarding some of
the important factors that could cause actual results to differ,
perhaps materially, from those in our forward-looking statements.
We disclaim any obligation, other than as may be imposed by law,
to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or
otherwise.
We file annual, quarterly, current and special reports, proxy
statements and other information with the Commission. You may
read and copy any document we file with the Commission at the
Commission’s Public Reference Room at
100 F Street N.E., Washington, D.C. 20549. Please
call the Commission at
1-800-SEC-0330
for further information on the Public Reference Room. Our SEC
filings are also available to the public from the
Commission’s Internet site at
http://www.sec.govor from our Internet site at
http://www.forestcity.net.
Our Corporate Governance Guidelines, our Code of Legal and
Ethical Conduct and our committee charters are also available on
our website at
http://www.forestcity.netor in print upon written request addressed to Corporate
Secretary, Forest City Enterprises, Inc., Terminal Tower, 50
Public Square, Suite 1360, Cleveland, Ohio44113. However,
the information on our Internet site does not constitute a part
of this prospectus.
Our Class A common stock, par value
$.331/3
per share, is listed on the New York Stock Exchange under the
symbol “FCEA.” You can also inspect and copy any
reports, proxy statements and other information that we file
with the Commission at the offices of the New York Stock
Exchange located at 20 Broad Street, New York,
NY10005.
In this prospectus, we incorporate by reference the information
that we file with the Commission. This allows us to disclose
important information to you by referring you to those documents
rather than repeating them in full in this prospectus. The
information incorporated by reference in this prospectus
contains important business and financial information. The
information incorporated by reference is considered to be part
of this prospectus and later information filed with the
Commission will update or supersede this information. We
incorporate by reference the documents listed below and any
future filings made with the Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, on or after the date of this
prospectus and until this offering is completed or terminated:
our Current Report on
Form 8-K,
filed with the Commission on February 5, 2009; and
•
a description of our Class A common stock contained in our
Registration Statement on Form 10 and all amendments or
reports filed with the Commission for the purpose of updating
such description.
Nothing in this prospectus shall be deemed to incorporate
information furnished but not filed with the Commission pursuant
to Item 2.02 or 7.01 of
Form 8-K.
You may request a copy of any of these filings, at no cost, by
telephoning or writing to us at the following phone number,
postal address or
e-mail
address:
Thomas T.
Kmiecik, Assistant Treasurer
Forest City Enterprises, Inc.
Terminal Tower, 50 Public Square, Suite 1100
Cleveland, Ohio
44113-2203
Telephone Number:
216-621-6060 tomkmiecik@forestcity.net
Unless we inform you otherwise in the applicable prospectus
supplement, we intend to use the net proceeds from the sale of
securities for general corporate purposes. These purposes may
include, but are not limited to, repayment of debt, additions to
working capital, development of new properties, capital
expenditures and acquisitions. Until we use the proceeds in this
manner, we may temporarily use them to make short-term
investments or to reduce short-term debt.
For purposes of determining the ratio of earnings to fixed
charges, earnings are defined as income from continuing
operations before income taxes, less interest capitalized, less
undistributed earnings of non-consolidated affiliates, plus
fixed charges. Fixed charges consist of interest expenses on all
indebtedness and that portion of operating lease rental expense
that is representative of the interest factor.
(a)
Included in earnings from continuing operations are non-cash
charges related to depreciation and amortization of
$269.6 million, $230.6 million, $174.7 million,
$156.2 million and $139.2 million for the fiscal years
ended January 31, 2009, 2008, 2007, 2006 and 2005, respectively.
Depreciation and amortization reduce earnings from continuing
operations, but do not impact our ability to cover our fixed
charges.
(b)
For the year ended January 31, 2009, the ratio of earnings
to fixed charges was deficient of achieving a 1:1 ratio by
$72.0 million.
To date, we have not issued any shares of preferred stock.
Therefore, the ratio of earnings to combined fixed charges and
preferred stock dividends is the same as the ratio of earnings
to fixed charges and is not separately presented.
We may use this prospectus to offer the following types of
securities:
•
Senior debt securities. These debt securities
will be unsecured and will rank equally with all of our other
unsubordinated and unsecured debt and may be convertible into,
or exchangeable for, our preferred stock or Class A common
stock.
•
Senior subordinated debt securities. These
debt securities will be unsecured and will rank equally with all
of our other senior subordinated and unsecured debt and may be
convertible into, or exchangeable for, our preferred stock or
Class A common stock.
•
Junior subordinated debt securities. These
debt securities will be unsecured and will rank equally with all
of our other junior subordinated and unsecured debt and may be
convertible into, or exchangeable for, our preferred stock or
Class A common stock.
•
Preferred stock, without par value. We can
offer different series of preferred stock with different
dividend, liquidation, redemption, conversion and voting rights.
•
Depositary Shares. We may issue depositary
shares that would each represent a fraction of a share of
preferred stock.
•
Class A common stock, par value
$.331/3
per share.
•
Warrants to purchase any of the foregoing securities.
A prospectus supplement will describe the specific types,
amounts, prices and detailed terms of any of these securities.
This section describes the general terms and provisions of the
senior debt securities that we may issue separately, upon
conversion of preferred stock or upon exercise of a debt warrant
from time to time in the form of one or more series of senior
debt securities. The applicable prospectus supplement will
describe the specific terms, or modify the general terms, of the
senior debt securities offered through that prospectus
supplement and any special federal income tax consequences of
these senior debt securities.
The senior debt securities we may offer will be issued under an
indenture, between us and The Bank of New York, as trustee,
or from time to time, in one or more series under an indenture
between us and a trustee who will be named in a prospectus
supplement. The statements and descriptions in this prospectus,
in any prospectus supplement or in any other offering material
regarding provisions of any indenture and the senior debt
securities are summaries thereof, do not purport to be complete
and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the applicable indenture
(and any amendments or supplements we may enter into from time
to time that are permitted under such indenture) and the senior
debt securities, including the definitions therein of certain
terms.
Unless we specify otherwise in the applicable prospectus
supplement, such indenture will be in the form filed as an
exhibit to, or incorporated by reference in the registration
statement (including amendments to such registration statement)
of which this prospectus is a part, subject to any amendments or
supplements to such indenture as we may adopt from time to time.
The trustee under the senior debt indenture has two main roles.
•
First, the trustee can enforce your rights against us if we
default. There are some limitations on the extent to which the
trustee acts on your behalf, which we describe later under
“— Events of Default” and
“— Modification and Waiver.”
•
Second, the trustee performs administrative duties for us, such
as sending you interest payments and notices.
See “— Relationship With the Trustee” below
for more information about the trustee.
We currently conduct substantially all of our operations through
our subsidiaries. Our ability to pay principal and interest on
the senior debt securities will depend upon the ability of our
subsidiaries to distribute their income to us. Some of our
subsidiaries are subject to financial covenants that may limit
or prohibit their ability to make loans, advances, dividends or
distributions to us.
The senior debt securities we may offer will rank equally in
right of payment with all our other existing and future senior
unsecured debt outstanding as of March 23, 2009, including
our $300.0 million aggregate principal amount of
7.625% senior notes due June 1, 2015, our
$100.0 million aggregate principal amount of
7.375% senior notes due February 1, 2034, our
$150.0 million aggregate principal amount of
6.500% senior notes due February 1, 2017, our
$272.5 million aggregate principal amount of 3.625%
puttable equity-linked senior notes due October 15, 2011,
and our guaranty of the borrowings under the Forest City Rental
Properties Corporation (“FCRPC”) Amended and Restated
Credit Agreement, dated as of June 6, 2007. FCRPC is one of
our wholly owned subsidiaries. The senior debt securities will
be effectively subordinated to all our existing and future
senior secured debt, to the extent of the value securing our
senior secured debt.
Although the senior debt securities will be our senior
obligations, they will be effectively subordinated to all
existing and future debt and other liabilities, including trade
payables and capital lease obligations, of our subsidiaries.
The FCRPC credit agreement prohibits the payment of principal
and interest on any senior debt securities during the existence
and continuation of a payment default under the FCRPC credit
agreement or the guaranty. In the event of a continuing
non-payment default, our guaranty prohibits FCRPC from making
any distribution to us except as necessary to pay interest on
any senior debt securities and taxes. Our guaranty will also
prohibit our redemption or defeasance of any of our senior debt
securities without the consent of the lenders under the FCRPC
credit agreement.
General
The applicable prospectus supplement will set forth the price or
prices at which the senior debt securities will be issued and
will describe the following terms of the senior debt securities,
if applicable:
•
the title and series of the senior debt securities;
•
any limit on the aggregate principal amount of the senior debt
securities;
•
the identity of the person to whom we will pay any interest on a
senior debt security, if it is any person other than the person
in whose name the senior debt security is registered at the
close of business on the regular record date for the interest
payment;
•
the date or dates on which we will pay the principal of the
senior debt securities;
•
if the senior debt securities will bear interest, the interest
rate or rates, the date or dates from which the interest will
accrue, the interest payment dates on which we will pay the
interest and the regular record date for the interest payable on
any interest payment date;
•
the place or places where we will pay the principal of, and any
premium and interest on, the senior debt securities;
•
the period or periods within which, the price or prices at
which, and the terms and conditions on which, we may, at our
option, redeem the senior debt securities, in whole or in part;
our obligation, if any, to repurchase or redeem the senior debt
securities upon the happening of an event or at your option;
•
if other than the entire principal amount, the portion of the
principal amount of the senior debt securities that we will pay
upon acceleration of maturity;
•
if other than the currency of the United States, the currency,
currencies or currency units in which we will pay the principal
of, or any premium or interest on, the senior debt securities
and the manner in which we will determine the equivalent of the
principal amount of the senior debt securities in the currency
of the United States for any purpose;
•
if, at our option or your option, we may pay the principal of,
or any premium or interest on, the senior debt securities in one
or more currencies or currency units other than those in which
the senior debt securities are stated to be payable, the
currency, currencies or currency units in which we will pay, at
our option or your option, these amounts, the periods within
which and the terms and conditions upon which the election must
be made by us or you, and the amount that we will pay or the
manner in which we will determine the amount;
•
if the principal amount payable at the stated maturity of the
senior debt securities will not be determinable as of any one or
more dates prior to the stated maturity, the amount that will be
deemed to be the principal amount as of any date for any purpose;
•
that the senior debt securities, in whole or in any specified
part, are defeasible as described below under
“— Defeasance and Discharge” or
“— Covenant Defeasance,” or under both
captions;
•
whether the principal or interest will be indexed to, or
determined by reference to, one or more securities, commodities,
indices or other financial measure;
•
whether the principal or interest may be payable, in whole or in
part, in securities of another issuer;
•
whether we may issue the senior debt securities, in whole or in
part, in the form of one or more global securities, and, if so,
the depositaries for the global securities, and, if different
from those described below under “— Global
Securities,” any circumstances under which we may exchange
or transfer any global security, in whole or in part, in the
names of persons other than the depositary or its
nominee; and
•
any addition to or change in the events of default applicable to
the senior debt securities and any change in the right of the
trustee or your rights to declare the principal amount of the
senior debt securities due and payable.
We may sell senior debt securities at a substantial discount to
their principal amount. We will describe any special United
States federal income tax considerations applicable to the
senior debt securities sold at an original issue discount in the
applicable prospectus supplement. In addition, we will describe
any special United States federal income tax or other
considerations applicable to any senior debt securities that are
denominated in a currency or currency unit other than United
States dollars in the applicable prospectus supplement.
Conversion
Rights
We will set forth in an applicable prospectus supplement whether
the senior debt securities will be convertible into or
exchangeable for any other securities and the terms and
conditions upon which a conversion or exchange may occur,
including the initial conversion or exchange price or rate, the
conversion or exchange period and any other additional
provisions.
Form,
Exchange and Transfer
We will issue the senior debt securities, if any, of each series
only in fully registered form, without coupons, and, unless
otherwise specified in the applicable prospectus supplement,
only in denominations and integral multiples of $1,000.
At your option, subject to the terms of the senior debt
indenture and the limitations applicable to global securities,
senior debt securities of each series will be exchangeable for
other senior debt securities of the same series of any
authorized denomination in the same aggregate principal amount.
Subject to the terms of the senior debt indenture and the
limitations applicable to global securities, you may present
senior debt securities for exchange as provided above or for
registration of transfer, if properly endorsed or with the form
of transfer properly endorsed and executed, at the office of the
security registrar or at the office of any transfer agent that
we designate. There will be no service charge for any
registration of transfer or exchange of senior debt securities,
but we may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection with the
transfer or exchange. The security registrar will effect a
transfer or exchange only if it is satisfied with the documents
of title and identity of the person making the request for the
transfer or exchange. We will appoint The Bank of New York or
such other trustee as named in a prospectus supplement as
security registrar, except as otherwise indicated in the
applicable prospectus supplement.
If we redeem the senior debt securities of any series in part,
we will not be required to issue, register the transfer of, or
exchange, any senior debt security of that series during a
period beginning at the opening of business 15 days before
the day of mailing of a notice of redemption and ending at the
close of business on the day of the mailing, or register the
transfer of, or exchange, any senior debt security selected for
redemption, in whole or in part, except the unredeemed portion
of any senior debt security being redeemed in part.
Global
Securities
Some or all of the senior debt securities of any series may be
represented, in whole or in part, by one or more global
securities that will have an aggregate principal amount equal to
that of the senior debt securities of the particular series
represented by the global securities. Each global security will
be registered in the name of a depositary or its nominee
identified in the applicable prospectus supplement, will be
deposited with that depositary or nominee or a custodian for the
depositary or nominee and will bear a legend regarding the
restrictions on exchanges and registration of transfer referred
to below and any other matters as may be provided under the
senior debt indenture.
Notwithstanding any provision of the senior debt indenture or
any senior debt security, no global security may be exchanged,
in whole or in part, for senior debt securities registered, and
no transfer of a global security, in whole or in part, may be
registered, in the name of any person other than the depositary
for the global security or any nominee of the depositary unless:
•
the depositary has notified us that it is unwilling or unable to
continue as depositary for the global security or has ceased to
be qualified to act as a depositary as required by the senior
debt indenture;
•
an event of default, or an event that with notice or lapse of
time, or both, will become an event of default, with respect to
the senior debt securities represented by the global security
has occurred and is continuing;
•
we so request; or
•
other circumstances, if any, in addition to or in lieu of those
described above and as may be described in the applicable
prospectus supplement, exist.
All securities issued in exchange for a global security or any
portion of a global security will be registered in the names
that the depositary directs.
As long as the depositary, or its nominee, is the registered
holder of a global security, the depositary or the nominee will
be considered the sole owner and holder of the global security
and the series of senior debt securities represented by the
global security for all purposes under that series of senior
debt securities and the senior debt indenture. Except in the
limited circumstances referred to above, owners of beneficial
interests in a global security will not be entitled to have a
global security or any series of senior debt securities
represented by the global security registered in their names,
will not receive or be entitled to receive physical delivery of
certificated senior debt securities in exchange for the global
security and will not be considered to be the owners or holders
of the global security or any series of senior debt securities
represented by the global security for any purpose under that
series of senior debt securities or the senior debt indenture.
All payments of principal of and any premium and interest on a
global security will be made to the depositary or its nominee,
as the case may be, as the holder of the global security. The
laws of some jurisdictions require that some purchasers of
securities take physical delivery of the securities in
definitive form. These laws may impair the ability to transfer
beneficial interests in a global security.
Ownership of beneficial interests in a global security will be
limited to institutions that have accounts with the depositary
or its nominee and to persons that may hold beneficial interests
through the depositary’s participants. In connection with
the issuance of any global security, the depositary will credit,
on its book-entry registration and transfer system, the
respective principal amounts of senior debt securities
represented by the global security to the accounts of its
participants. Ownership of beneficial interests in a global
security will be shown only on, and the transfer of those
ownership interests will be effected only through, records
maintained by the depositary, with respect to participants’
interests, or by any participant, with respect to interests of
persons held by participants on their behalf. Payments,
transfers, exchanges and other matters relating to beneficial
interests in a global security may be subject to various
policies and procedures adopted by the depositary from time to
time. None of us, the senior debt trustee or any agent of ours
or the senior debt trustee will have any responsibility or
liability for any aspect of the depositary’s or any
participant’s records relating to, or for payments made
for, beneficial interests in a global security or for
maintaining, supervising or reviewing any records relating to
beneficial interests.
Unless otherwise stated in the applicable prospectus supplement,
we will appoint The Depository Trust Company
(“DTC”) as the depositary for the senior debt
securities.
We understand that neither DTC nor its nominee will consent or
vote with respect to the senior debt securities. We have been
advised that under its usual procedures, DTC will mail an
omnibus proxy to us as soon as possible after the record date.
The omnibus proxy assigns consenting or voting rights of
DTC’s nominee to those participants to whose accounts the
senior debt securities are credited on the record date
identified in a listing attached to the omnibus proxy.
DTC has advised us that it will take any action permitted to be
taken by a holder of senior debt securities (including the
presentation of senior debt securities for exchange) only at the
direction of one or more participants to whose account with DTC
interests in the global security are credited and only in
respect of such portion of the principal amount of the senior
debt securities represented by the global security as to which
such participant or participants has or have given such
direction.
DTC has also advised us as follows:
•
DTC is a limited purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve
System, a clearing corporation within the meaning of the Uniform
Commercial Code, as amended, and a clearing agency registered
pursuant to the provisions of Section 17A of the Exchange
Act;
•
DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities
transactions between participants through electronic
computerized book-entry changes in accounts of its participants;
•
DTC’s participants include securities brokers and dealers,
banks, trust companies and clearing corporations and may include
certain other organizations;
•
certain participants, or other representatives, together with
other entities, own DTC; and
•
indirect access to the DTC system is available to other entities
such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant,
either directly or indirectly.
Payment
and Paying Agents
Unless otherwise indicated in the applicable prospectus
supplement, payment of interest on a senior debt security on any
interest payment date will be made to the person in whose name
the senior debt security, or one or more predecessor senior debt
securities, is registered at the close of business on the
regular record date for the interest payment.
Unless otherwise indicated in the applicable prospectus
supplement, principal of, and any premium and interest on, the
senior debt securities of a particular series will be payable at
the office of the paying agent or paying agents that we may
designate from time to time. Any other paying agents that we
initially designate for the senior debt securities of a
particular series will be named in the applicable prospectus
supplement. We may at any time designate additional paying
agents or rescind the designation of any paying agent or approve
change in the office through which any paying agent acts, except
that we will be required to maintain a paying agent in each
place of payment for the senior debt securities of a particular
series.
All moneys that we deposit with the trustee or pay to a paying
agent for the payment of the principal of, or any premium or
interest on, any senior debt security that remain unclaimed at
the end of two years after the principal, premium or interest
has become due and payable will be repaid to us, and the holder
of the senior debt security may look only to us for payment of
any principal, premium or interest.
Restrictive
Covenants
Covenants applicable to the senior debt securities will be set
forth in the applicable prospectus supplement.
Consolidation,
Merger and Sale of Assets
Unless otherwise specified in the applicable prospectus
supplement, the senior debt indenture will provide that Forest
City Enterprises, Inc. may not consolidate with, merge into or
reorganize with or into, or transfer, convey, sell, lease or
otherwise dispose of all or substantially all of its assets to,
any entity, unless all of the following conditions are met.
•
If the successor entity is not Forest City Enterprises, Inc.,
the successor entity is organized under the laws of any domestic
jurisdiction and expressly assumes Forest City Enterprises,
Inc.’s obligations under the senior debt indenture.
•
Immediately before and after giving effect to the transaction,
and treating any debt that becomes an obligation of ours or the
successor entity as a result of the transaction as having been
incurred by us or the successor entity at the time of the
transaction, no event of default, and no event that, after
notice or lapse of time or both, would become an event of
default, has occurred and is continuing.
•
Immediately after giving effect to the transaction, the
consolidated net worth (as defined in the senior debt indenture)
of Forest City Enterprises, Inc. or the successor entity is
equal to or greater than 90% of Forest City Enterprises,
Inc.’s consolidated net worth immediately prior to the
transaction.
•
Immediately after giving effect to the transaction, and treating
any debt that becomes our obligation as a result of the
transaction as having been incurred by us at the time of the
transaction, Forest City Enterprises, Inc. could incur at least
$1.00 of additional debt under specified financial ratios
contained in the senior debt indenture.
•
If, as a result of the transaction, our properties or assets
would become subject to a lien or other encumbrance that would
not be permitted by the senior debt indenture, Forest City
Enterprises, Inc. or the successor entity, as the case may be,
takes the steps necessary to secure the senior debt securities
equally and ratably with, or prior to, the indebtedness secured
by the lien or other encumbrance.
•
Forest City Enterprises, Inc. delivers to the trustee an
officers’ certificate and an opinion of counsel, both of
which state that the transaction complies with the terms of the
senior debt indenture.
Events of
Default
Unless otherwise set forth in the applicable prospectus
supplement, each of the following events will constitute an
event of default under the senior debt indenture, if applicable:
•
failure to pay principal of, or premium, if any, on, any senior
debt security when due;
•
failure to pay any interest on any senior debt security when due
that continues for 30 days;
failure to perform or observe the covenants in the senior debt
indenture, which may relate to dispositions of assets, mergers,
consolidations and sales of all or substantially all our assets,
or a change of control of the company, as specified in the
applicable prospectus supplement;
•
failure to perform other covenants in the senior indenture that
continues for 30 days after written notice as provided in
the senior debt indenture;
•
a default under any recourse debt by us, individually or in the
aggregate, in excess of $10.0 million, which default
(1) constitutes a failure to pay when due, subject to any
applicable grace period, any portion of the principal of that
recourse debt, and (2) results in that recourse debt
becoming or being declared due and payable prior to its stated
maturity;
•
a default under any non-recourse debt by us, individually or in
the aggregate, in excess of 20% of the aggregate principal
amount of all of our outstanding non-recourse debt, which
default (1) constitutes a failure to pay when due, subject
to any applicable grace period, any portion of the principal of
that non-recourse debt, or (2) results in that non-recourse
debt becoming or being declared due and payable prior to its
stated maturity;
•
the rendering of a final judgment or judgments against us or any
subsidiary that is not subject to appeal in an amount in excess
of $10.0 million that remains undischarged or unstayed for
a period of 45 days after the date on which the right to
appeal has expired;
•
we or any of our significant subsidiaries file for bankruptcy,
or other events in bankruptcy, insolvency or reorganization
occur; and
•
any other event of default specified in the applicable
prospectus supplement.
Subject to the provisions of the senior debt indenture relating
to the duties of the trustee in case an event of default occurs
and is continuing, the trustee will be under no obligation to
exercise any of its rights or powers under the senior debt
indenture at the request or direction of any of the holders,
unless those holders have offered reasonable indemnity to the
trustee. Subject to the provisions of the senior debt indenture
relating to the indemnification of the trustee, the holders of a
majority in aggregate principal amount of the outstanding senior
debt securities will have the right to direct the time, method
and place of conducting any proceeding for any remedy available
to the trustee or exercising any trust or power conferred on the
trustee.
If an event of default, other than an event of default relating
to bankruptcy, insolvency or reorganization, occurs and is
continuing, either the trustee or the holders of at least 25% in
aggregate principal amount of a series of outstanding senior
debt securities may accelerate the maturity of all senior debt
securities of that series. If an event of default relating to
bankruptcy, insolvency or reorganization occurs, the principal
amount of all the senior debt securities, or, in the case of any
original issue discount security or other senior debt security,
a specified amount, will automatically, and without any action
by the trustee or any holder, become immediately due and
payable. However, after the acceleration, but before a judgment
or decree based on acceleration, the holders of a majority in
aggregate principal amount of outstanding senior debt securities
of that series may, under specific circumstances, rescind the
acceleration if all events of default, other than the
non-payment of accelerated principal, have been cured or waived
as provided in the senior debt indenture. For a more detailed
discussion as to waiver of defaults, see
“— Modification and Waiver.”
No holder of any senior debt security will have any right to
institute any proceeding with respect to the senior debt
indenture or for any remedy under the senior debt indenture
unless:
•
the holder has previously given to the trustee written notice of
a continuing event of default with respect to that series of
senior debt securities;
•
the holders of at least 25% in aggregate principal amount of the
outstanding senior debt securities of the relevant series have
made a written request, and offered reasonable indemnity, to the
trustee to institute the proceeding as trustee;
•
the trustee has failed to institute the proceeding within
60 days; and
•
the trustee has not received from the holders of a majority in
aggregate principal amount of the outstanding senior debt
securities of the relevant series a direction inconsistent with
the holders’ request.
However, these limitations do not apply to a suit instituted by
a holder of a senior debt security for enforcement of payment of
the principal of, and premium, if any, or interest on, any
senior debt security on or after the respective due dates
expressed in the senior debt security.
We will be required to furnish to the trustee a statement as to
our performance of some of our obligations under the senior debt
indenture and as to any default in our performance.
Modification
and Waiver
Unless otherwise set forth in the applicable prospectus
supplement, we and the trustee may modify and amend the senior
debt indenture with the consent of the holders of not less than
a majority in aggregate principal amount of any series of
outstanding senior debt securities, and, in some instances, we
and the trustee may modify and amend the senior debt indenture
without the consent of the holders of any series of outstanding
senior debt securities. However, we and the trustee may not
modify or amend the senior debt indenture without the consent of
the holder of each outstanding senior debt security affected by
the modification or amendment if the modification or amendment:
•
changes the stated maturity of the principal of, or any
installment of interest on, any senior debt security;
•
reduces the principal amount of, or the premium or interest on,
any senior debt security;
•
changes the place or currency of payment of principal of, or
premium or interest on, any senior debt security;
•
impairs the right to institute suit for the enforcement of any
payment on or with respect to any senior debt security;
•
reduces the percentage of any series of outstanding senior debt
securities necessary to modify or amend the senior debt
indenture;
•
reduces the percentage of aggregate principal amount of any
series of outstanding senior debt securities necessary for
waiver of compliance with specified provisions of the senior
debt indenture or for waiver of specified defaults; or
•
modifies any other provisions of the senior debt indenture set
forth in the applicable prospectus supplement relating to the
senior debt securities, except to increase any percentages
referred to above or to provide that other provisions of the
senior debt indenture cannot be modified or waived without the
consent of the holders.
The holders of a majority in aggregate principal amount of any
series of outstanding senior debt securities may waive our
compliance with specified restrictive provisions of the senior
debt indenture. The holders of a majority in aggregate principal
amount of any series of outstanding senior debt securities may
waive any past default under the senior debt indenture with
respect to that series, except a default in the payment of
principal, premium, if any, or interest or any other default
specified in the applicable prospectus supplement.
Defeasance
and Discharge
The senior debt indenture will provide that, upon the exercise
of our option, we will be discharged from all our obligations
with respect to any senior debt securities of a series, except
for the following obligations:
•
to exchange or register the transfer of senior debt securities;
•
to replace stolen, lost or mutilated senior debt securities;
•
to maintain paying agencies; and
•
to hold moneys for payment in trust, upon our deposit in trust
for the benefit of the holders of the senior debt securities of
money or United States government obligations, or both, in an
amount sufficient to pay the principal of, and any premium and
interest on, senior debt securities of that series on the stated
maturity in accordance with the terms of the senior debt
indenture and the senior debt securities of that series.
We may only exercise defeasance or discharge if, among other
things, we have delivered to the trustee an opinion of counsel
to the effect that we have received from, or there has been
published by, the Internal Revenue Service a
ruling, or there has been a change in tax law, in either case to
the effect that holders of the senior debt securities of a
relevant series will not recognize gain or loss for federal
income tax purposes as a result of the deposit, defeasance and
discharge and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have
been the case if the deposit, defeasance and discharge were not
to occur.
Covenant
Defeasance
The senior debt indenture will provide that, at our option, we
may omit to comply with specified restrictive covenants related
to the senior debt securities of a series, including any that
may be described in the applicable prospectus supplement, and
the occurrence of specified events of default related to the
senior debt securities of that series will be deemed not to be
or result in an event of default. We may only exercise this
option if we deposit, in trust for the benefit of the holders of
the senior debt securities of that series, money or United
States government obligations, or both, in an amount sufficient
to pay the principal of, and any premium and each installment of
interest on, the senior debt securities of that series on the
stated maturity in accordance with the terms of the senior debt
indenture and the senior debt securities of that series. We also
must, among other things, deliver to the trustee an opinion of
counsel to the effect that holders of the senior debt securities
of the relevant series will not recognize gain or loss for
federal income tax purposes as a result of the deposit and
defeasance of specified obligations and will be subject to
federal income tax on the same amount, in the same manner and at
the same times as would have been the case if the deposit and
defeasance were not to occur.
If we exercise this option with respect to any senior debt
securities of a series and the senior debt securities of that
series are declared due and payable because of the occurrence of
any event of default, the amount of money and United States
government obligations deposited in trust may be insufficient to
pay amounts due on the senior debt securities of that series at
the time of the acceleration. In such a case, we would remain
liable for the deficiency.
Notices
Unless otherwise specified in the applicable prospectus
supplement, notices to the holders of senior debt securities
will be given by mail to the addresses of those holders as they
may appear in the security register.
Title
Unless otherwise specified in the applicable prospectus
supplement, we, the trustee and any agents of ours or the
trustee may treat the person in whose name a senior debt
security is registered as the absolute owner of the senior debt
security, whether or not the senior debt security may be
overdue, for the purpose of making payment and for all other
purposes.
Relationship
with the Trustee
The Bank of New York is our trustee under our current senior
debt indenture. If we enter into a new indenture with a
different trustee, the applicable prospectus supplement will
specify the trustee under the new indenture.
Governing
Law
The senior debt indenture and the senior debt securities will be
governed by, and construed in accordance with, the law of the
State of New York, unless otherwise indicated in the applicable
prospectus supplement.
This section describes the general terms and provisions of the
subordinated debt securities that we may issue separately, upon
conversion of preferred stock or upon exercise of a debt warrant
from time to time in the form of one or more series of
subordinated debt securities. The applicable prospectus
supplement will describe the specific terms, or modify the
general terms, of the subordinated debt securities offered
through that prospectus supplement and any special federal
income tax consequences of these subordinated debt securities.
The subordinated debt securities we may offer will be issued
under an indenture between us and a subordinated trustee who
will be named in a prospectus supplement. The senior
subordinated indenture and junior subordinated indenture are
sometimes referred to collectively in this prospectus as the
“subordinated indentures.” The statements and
descriptions in this prospectus, in any prospectus supplement or
in any other offering material regarding provisions of any
subordinated indenture and the subordinated debt securities are
summaries thereof, do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all of
the provisions of the applicable subordinated indenture (and any
amendments or supplements we may enter into from time to time
that are permitted under such indenture) and the subordinated
debt securities, including the definitions therein of certain
terms.
Unless we specify otherwise in the applicable prospectus
supplement, such subordinated debt indenture will be in the form
filed as an exhibit to, or incorporated by reference in the
registration statement (including amendments to such
registration statement) of which this prospectus is a part,
subject to any amendments or supplements to such subordinated
debt indenture as we may adopt from time to time.
The subordinated trustee under each of the subordinated debt
indentures has two main roles.
•
First, the subordinated trustee can enforce your rights against
us if we default. There are some limitations on the extent to
which the subordinated trustee acts on your behalf, which we
describe later under “— Events of Default”
and “— Modification and Waiver.”
•
Second, the subordinated trustee performs administrative duties
for us, such as sending you interest payments and notices.
See “— Relationship With the Subordinated
Trustee” below for more information about the trustee.
We currently conduct substantially all of our operations through
our subsidiaries. Our ability to pay principal and interest on
the subordinated debt securities will depend on the ability of
our subsidiaries to distribute their income to us. Some of our
subsidiaries are subject to financial covenants that may limit
or prohibit their ability to make loans, advances, dividends or
distributions to us.
The junior subordinated debt securities we may offer, if any,
will be subordinated in right of payment to all senior debt (as
defined under “— Definitions”), and the
senior subordinated debt securities will be subordinated in
right of payment to all senior indebtedness (as defined under
“— Definitions”). For a more detailed
discussion of this subordination, see
“— Subordination of Subordinated Debt
Securities.”
The senior indebtedness outstanding as of March 23, 2009 is
our $300.0 million aggregate principal amount of
7.625% senior notes due June 1, 2015, our
$100.0 million aggregate principal amount of
7.375% senior notes due February 1, 2034, our
$150.0 million aggregate principal amount of
6.500% senior notes due February 1, 2017, our
$272.5 million aggregate principal amount of 3.625%
puttable equity-linked senior notes due October 15, 2011
and our guaranty of borrowings under the FCRPC Amended and
Restated Credit Agreement. The senior debt outstanding as of
March 23, 2009 is, in addition to the senior
indebtedness outstanding as of that date, our guaranties of the
$20.4 million of Redevelopment Bonds that are due
September 15, 2010 and $29.0 million of Subordinate
Tax Revenue Bonds due December 1, 2013. The holders of
subordinated debt securities, including senior subordinated debt
securities, will also be effectively subordinated to all
existing and future debt and other liabilities, including trade
payables and capital lease obligations, of our subsidiaries.
General
The subordinated indentures will provide that we may issue
subordinated debt securities in separate series from time to
time without limitation as to aggregate principal amount. We may
specify a maximum aggregate principal amount for the
subordinated debt securities of any series. The subordinated
debt securities will have terms and provisions that are not
inconsistent with the subordinated indentures, including as to
maturity, principal and interest, as we may determine.
The applicable prospectus supplement will set forth whether the
subordinated debt securities will be senior subordinated debt
securities or junior subordinated debt securities and the price
or prices at which we will issue the
subordinated debt securities. The applicable prospectus
supplement will also describe the following terms of the
subordinated debt securities, if applicable:
•
the title and series of the subordinated debt securities;
•
any limit on the aggregate principal amount of the subordinated
debt securities or the series of which they are a part;
•
the identity of the person to whom we will pay any interest on a
subordinated debt security, if it is any person other than the
person in whose name the subordinated debt security is
registered at the close of business on the regular record date
for the interest payment;
•
the date or dates on which we will pay the principal of the
subordinated debt securities;
•
if the subordinated debt securities will bear interest, the
interest rate or rates, the date or dates from which the
interest will accrue, the interest payment dates on which we
will pay the interest and the regular record date for the
interest payable on any interest payment date;
•
the place or places where we will pay the principal of, and any
premium and interest on, the subordinated debt securities;
•
the period or periods within which, the price or prices at
which, and the terms and conditions on which, we may, at our
option, redeem the subordinated debt securities, in whole or in
part;
•
our obligation, if any, to redeem or purchase the subordinated
debt securities in connection with any sinking fund or similar
provision or at the option of the holder, and the period or
periods within which, the price or prices at which, and the
terms and conditions on which, we will redeem or repurchase any
of the subordinated debt securities, in whole or in part, in
connection with this obligation;
•
the denominations in which we will issue the subordinated debt
securities, if other than denominations and integral multiples
of $1,000;
•
the index or formula, if any, that we will use to determine the
amount of principal of, or any premium or interest on, the
subordinated debt securities;
•
if other than the currency of the United States, the currency,
currencies or currency units in which we will pay the principal
of, or any premium or interest on, the subordinated debt
securities and the manner in which we will determine the
equivalent of the principal amount of the subordinated debt
securities in the currency of the United States for any purpose;
•
if, at our option or your option, we may pay the principal of,
or any premium or interest on, the subordinated debt securities
in one or more currencies or currency units other than those in
which the subordinated debt securities are stated to be payable,
the currency, currencies or currency units in which we will pay,
at our option or your option, these amounts, the periods within
which and the terms and conditions upon which the election must
be made by us or you, and the amount that we will pay or the
manner in which we will determine the amount;
•
if other than the entire principal amount, the portion of the
principal amount of the subordinated debt securities that we
will pay upon acceleration of maturity;
•
if the principal amount payable at the stated maturity of the
subordinated debt securities will not be determinable as of any
one or more dates prior to the stated maturity, the amount that
will be deemed to be the principal amount as of any date for any
purpose;
•
that the subordinated debt securities, in whole or any specified
part, are defeasible under the provisions of the applicable
subordinated indenture described below under “—
Defeasance and Discharge” or “— Covenant
Defeasance,” or under both captions;
•
whether the principal or interest will be indexed to, or
determined by reference to, one or more securities, commodities,
indices, or other financial measure;
whether the principal or interest may be payable, in whole or in
part, in securities of another issuer;
•
whether we may issue the subordinated debt securities, in whole
or in part, in the form of one or more global securities, and,
if so, the depositaries for the global securities, and, if
different from those described below under
“— Global Securities,” any circumstances
under which we may exchange or transfer any global security, in
whole or in part, for securities in the names of persons other
than the depositary or its nominee; and
•
any addition to or change in the events of default applicable to
the subordinated debt securities and any change in the right of
the subordinated trustee or the holders of the subordinated debt
securities to declare the principal amount of the subordinated
debt securities due and payable.
We may sell subordinated debt securities at a substantial
discount to their principal amount. We will describe any special
United States federal income tax considerations applicable to
subordinated debt securities sold at an original issue discount
in the applicable prospectus supplement. In addition, we will
describe any special United States federal income tax or
other considerations applicable to any subordinated debt
securities that are denominated in a currency or currency unit
other than United States dollars in the applicable prospectus
supplement.
Conversion
Rights
We will set forth in an applicable prospectus supplement whether
the subordinated debt securities will be convertible into or
exchangeable for any other securities and the terms and
conditions upon which a conversion or exchange may occur,
including the initial conversion or exchange price or rate, the
conversion or exchange period and any other additional
provisions.
Subordination
of Subordinated Debt Securities
Unless otherwise indicated in the applicable prospectus
supplement, the following provisions will apply to the
subordinated debt securities.
Senior
Subordinated Debt Securities
The senior subordinated debt indenture may provide that the
senior subordinated debt securities are subordinate in right of
payment to the prior payment in full of all senior indebtedness,
which, as of March 23, 2009, includes our
$300.0 million aggregate principal amount of
7.625% senior notes due June 1, 2015, our
$100.0 million aggregate principal amount of
7.375% senior notes due February 1, 2034, our
$150.0 million aggregate principal amount of
6.500% senior notes due February 1, 2017, our
$272.5 million aggregate principal amount of 3.625%
puttable
equity-linked
senior notes due October 15, 2011 and our guaranty of the
obligations under the FCRPC Amended and Restated Credit
Agreement, and any senior debt securities that we may issue
under the senior debt indenture.
The holders of all senior indebtedness outstanding at the time
of acceleration will first be entitled to receive payment in
full of all amounts due on the senior indebtedness before the
holders of the senior subordinated debt securities will be
entitled to receive any payment upon the principal of, or
premium, if any, or interest, if any, on the senior subordinated
debt securities in the following circumstances:
•
upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment
for the benefit of creditors, or any bankruptcy, insolvency,
debt restructuring or similar proceedings in connection with any
insolvency or bankruptcy proceeding of Forest City Enterprises,
Inc.;
•
(a) in the event and during the continuation of any default
in the payment of principal, premium or interest on any senior
indebtedness beyond any applicable grace period or (b) in
the event that any event of default with respect to any senior
indebtedness has occurred and is continuing, permitting the
holders of that senior indebtedness (or a trustee) to accelerate
the maturity of that senior indebtedness, whether or not the
maturity is in fact accelerated (unless, in the case of
(a) or (b), the payment default or event of default has
been cured or waived or ceased to exist and any related
acceleration has been rescinded) or (c) in the event that
any judicial proceeding is pending with respect to a payment
default or event of default described in (a) or (b); or
•
in the event that any senior subordinated debt securities have
been declared due and payable before their stated maturity.
By reason of this subordination, in the event of liquidation or
insolvency, holders of senior subordinated debt securities may
recover less than holders of senior indebtedness and may recover
more than the holders of junior subordinated debt securities.
For purposes of the subordination provisions, the payment,
issuance and delivery of cash, property or securities, other
than stock and some of our subordinated securities, upon
conversion or exchange of a senior subordinated debt security
will be deemed to constitute payment upon the principal of the
senior subordinated debt security.
Junior
Subordinated Debt Securities
The junior subordinated debt indenture may provide that the
junior subordinated debt securities are subordinate in right of
payment to the prior payment in full of all senior debt,
including any senior subordinated debt securities that we may
issue under the senior subordinated debt indenture.
The holders of all senior debt outstanding at the time of
acceleration will first be entitled to receive payment in full
of all amounts due on the senior debt before the holders of the
junior subordinated debt securities will be entitled to receive
any payment upon the principal of, or premium, if any, or
interest, if any, on the junior subordinated debt securities in
the following circumstances:
•
upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment
for the benefit of creditors, or any bankruptcy, insolvency,
debt restructuring or similar proceedings in connection with any
insolvency or bankruptcy proceeding of Forest City Enterprises,
Inc.;
•
(a) in the event and during the continuation of any default
in the payment of principal, premium or interest on any senior
debt beyond any applicable grace period or (b) in the event
that any event of default with respect to any senior debt has
occurred and is continuing, permitting the holders of that
senior debt (or a trustee) to accelerate the maturity of that
senior debt, whether or not the maturity is in fact accelerated
(unless, in the case of (a) or (b), the payment default or
event of default has been cured or waived or ceased to exist and
any related acceleration has been rescinded) or (c) in the
event that any judicial proceeding is pending with respect to a
payment default or event of default described in (a) or
(b); or
•
in the event that any junior subordinated debt securities have
been declared due and payable before their stated maturity.
By reason of this subordination, in the event of liquidation or
insolvency, holders of junior subordinated debt securities may
recover less than holders of senior debt, including the holders
of any senior subordinated debt securities.
For purposes of the subordination provisions, the payment,
issuance and delivery of cash, property or securities, other
than stock and some of our subordinated securities, upon
conversion or exchange of a junior subordinated debt security
will be deemed to constitute payment upon the principal of the
junior subordinated debt security.
Definitions
Unless otherwise indicated in the applicable prospectus
supplement, the following definitions are applicable to the
subordinated indentures relating to the subordinated debt
securities. You should refer to the applicable subordinated
indenture for the full definition of each term.
“Debt”means, without duplication, with respect
to any person or entity, whether recourse is to all or a portion
of the assets of that person or entity and whether or not
contingent:
•
every obligation of that person or entity for money borrowed;
•
every obligation of that person or entity evidenced by bonds,
debentures, notes or other similar instruments, including
obligations incurred in connection with the acquisition of
property, assets or businesses;
every reimbursement obligation of that person or entity with
respect to letters of credit, bankers’ acceptances or
similar facilities issued for the account of that person or
entity;
•
every obligation of that person or entity issued or assumed as
the deferred purchase price of property or services;
•
all indebtedness of that person or entity, whether incurred on
or prior to the date of the applicable subordinated indenture or
incurred later, for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity
forward contracts, options and swaps and similar
arrangements; and
•
every obligation of the type referred to in the foregoing
clauses of another person or entity and all dividends of another
person or entity the payment of which, in either case, that
person or entity has guaranteed or is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise;
provided that this definition does not include trade accounts
payable or accrued liabilities arising in the ordinary course of
business.
“Senior debt”means the principal of, and
premium, if any, and interest if any, on debt (as defined
above), whether incurred on or prior to the date of the junior
subordinated indenture or created later, unless, in the
instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is provided that the obligations are
not superior in right of payment to the junior subordinated debt
securities or to other debt that is equal with, or subordinated
to, the junior subordinated debt securities. Senior debt will
not include any debt (as defined above) that, when incurred and
without respect to any election under Section 1111(b) of
the Bankruptcy Code, was without recourse to us, debt to any of
our employees, and the junior subordinated debt securities.
“Senior indebtedness”means the principal of,
and premium, if any, and interest on all indebtedness for
borrowed money, whether incurred on or prior to the date of the
senior subordinated indenture or incurred later, excluding
(a) the subordinated debt securities and
(b) obligations that by their terms are not superior in
right of payment to the senior subordinated securities or to
other indebtedness that is equal with, or subordinated to, the
senior subordinated securities. The term “indebtedness for
money borrowed” as used in the prior sentence means any
obligation of, or any obligation guaranteed by, Forest City
Enterprises, Inc. for the repayment of borrowed money, whether
or not evidenced by bonds, debentures, notes or other written
instruments, and any deferred obligation for the payment of the
purchase price of property or assets.
Neither subordinated indenture limits or prohibits the
incurrence of additional senior debt or senior indebtedness,
either of which may include indebtedness that is senior to the
subordinated debt securities, but subordinate to other
obligations of ours. In connection with the future issuances of
securities, the subordinated indentures may be amended or
supplemented to limit the amount of indebtedness incurred by us.
The applicable prospectus supplement may further describe the
provisions, if any, applicable to the subordination of the
subordinated debt securities of a particular series.
Form,
Exchange and Transfer
We will issue the subordinated debt securities, if any, of each
series only in fully registered form, without coupons, and,
unless otherwise specified in the applicable prospectus
supplement, only in denominations and integral multiples of
$1,000.
At the option of the holder, subject to the terms of the
applicable subordinated indenture and the limitations applicable
to global securities, subordinated debt securities of each
series will be exchangeable for other subordinated debt
securities of the same series of any authorized denomination in
the same aggregate principal amount.
Subject to the terms of the applicable subordinated indenture
and the limitations applicable to global securities, you may
present subordinated debt securities for exchange as provided
above or for registration of transfer, if properly endorsed or
with the form of transfer properly endorsed and executed, at the
office of the security registrar or at the office of any
transfer agent that we designate. There will be no service
charge for any registration of transfer
or exchange of subordinated debt securities, but we may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the transfer or
exchange. The security registrar or transfer agent will effect a
transfer or exchange only if it is satisfied with the documents
of title and identity of the person making the request for the
transfer or exchange. We will appoint a security registrar, as
indicated in the applicable prospectus supplement. Any transfer
agent that we initially designate for any subordinated debt
securities will be named in the applicable prospectus
supplement. We may at any time designate additional transfer
agents or rescind the designation of any transfer agent or
approve a change in the office through which any transfer agent
acts, except that we will be required to maintain a transfer
agent in each place of payment for the subordinated debt
securities of each series.
If we redeem the subordinated debt securities of any series in
part, we will not be required to issue, register the transfer
of, or exchange, any subordinated debt security of that series
during a period beginning at the opening of business
15 days before the day of mailing of a notice of redemption
and ending at the close of business on the day of the mailing,
or register the transfer of, or exchange, any subordinated debt
security selected for redemption, in whole or in part, except
the unredeemed portion of any subordinated debt security being
redeemed in part.
Global
Securities
Some or all of the subordinated debt securities of any series
may be represented, in whole or in part, by one or more global
securities that will have an aggregate principal amount equal to
that of the subordinated debt securities of the particular
series represented by the global securities. Each global
security will be registered in the name of a depositary or its
nominee identified in the applicable prospectus supplement, will
be deposited with that depositary or nominee or a custodian for
the depositary or nominee and will bear a legend regarding the
restrictions on exchanges and registration of transfer referred
to below and any other matters as may be provided under the
applicable subordinated indenture.
Notwithstanding any provision of the applicable subordinated
indenture or any subordinated debt security, no global security
may be exchanged, in whole or in part, for subordinated debt
securities registered, and no transfer of a global security, in
whole or in part, may be registered, in the name of any person
other than the depositary for the global security or any nominee
of the depositary unless:
•
the depositary has notified us that it is unwilling or unable to
continue as depositary for the global security or has ceased to
be qualified to act as a depositary as required by the
applicable subordinated indenture;
•
an event of default with respect to the subordinated debt
securities of a series represented by the global security has
occurred and is continuing; or
•
other circumstances, if any, in addition to or in lieu of those
described above and as may be described in the applicable
prospectus supplement, exist.
All securities issued in exchange for a global security or any
portion of a global security will be registered in the names
that the depositary directs.
As long as the depositary, or its nominee, is the registered
holder of a global security, the depositary or the nominee will
be considered the sole owner and holder of the global security
and the series of subordinated debt securities represented by
the global security for all purposes under the subordinated debt
securities and the applicable subordinated indenture. Except in
the limited circumstances referred to above, owners of
beneficial interests in a global security will not be entitled
to have a global security or any subordinated debt securities
represented by the global security registered in their names,
will not receive or be entitled to receive physical delivery of
certificated subordinated debt securities in exchange for the
global security and will not be considered to be the owners or
holders of the global security or any subordinated debt
securities represented by the global security for any purpose
under the subordinated debt securities or the applicable
subordinated indenture. All payments of principal of and any
premium and interest on a global security will be made to the
depositary or its nominee, as the case may be, as the holder of
the global security. The laws of some jurisdictions require that
some purchasers of securities take physical delivery of the
securities in definitive form. These laws may impair the ability
to transfer beneficial interests in a global security.
Ownership of beneficial interests in a global security will be
limited to institutions that have accounts with the depositary
or its nominee and to persons that may hold beneficial interests
through the depositary’s participants. In connection with
the issuance of any global security, the depositary will credit,
on its book-entry registration and transfer system, the
respective principal amounts of the series of subordinated debt
securities represented by the global security to the accounts of
its participants. Ownership of beneficial interests in a global
security will be shown only on, and the transfer of those
ownership interests will be effected only through, records
maintained by the depositary, with respect to participants’
interests, or by any participant, with respect to interests of
persons held by participants on their behalf. Payments,
transfers, exchanges and other matters relating to beneficial
interests in a global security may be subject to various
policies and procedures adopted by the depositary from time to
time. None of us, the subordinated trustee or any agent of ours
or the subordinated trustee will have any responsibility or
liability for any aspect of the depositary’s or any
participant’s records relating to, or for payments made
for, beneficial interests in a global security or for
maintaining, supervising or reviewing any records relating to
beneficial interests.
Unless otherwise stated in the applicable prospectus supplement,
we will appoint DTC as the depositary for the subordinated debt
securities.
We understand that neither DTC nor its nominee will consent or
vote with respect to the subordinated debt securities. We have
been advised that under its usual procedures, DTC will mail an
omnibus proxy to us as soon as possible after the record date.
The omnibus proxy assigns consenting or voting rights of
DTC’s nominee to those participants to whose accounts the
subordinated debt securities are credited on the record date
identified in a listing attached to the omnibus proxy.
DTC has advised us that it will take any action permitted to be
taken by a holder of subordinated debt securities (including the
presentation of subordinated debt securities for exchange) only
at the direction of one or more participants to whose account
with DTC interests in the global security are credited and only
in respect of such portion of the principal amount of the
subordinated debt securities represented by the global security
as to which such participant or participants has or have given
such direction.
DTC has also advised us as follows:
•
DTC is a limited purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve
System, a clearing corporation within the meaning of the Uniform
Commercial Code, as amended, and a clearing agency registered
pursuant to the provisions of Section 17A of the Exchange
Act;
•
DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities
transactions between participants through electronic
computerized book-entry changes in accounts of its participants;
•
DTC’s participants include securities brokers and dealers,
banks, trust companies and clearing corporations and may include
certain other organizations;
•
certain participants, or other representatives, together with
other entities, own DTC; and
•
indirect access to the DTC system is available to other entities
such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant,
either directly or indirectly.
Payment
and Paying Agents
Unless otherwise indicated in the applicable prospectus
supplement, payment of interest on a subordinated debt security
on any interest payment date will be made to the person in whose
name the subordinated debt security, or one or more predecessor
debt securities, is registered at the close of business on the
regular record date for the interest payment.
Unless otherwise indicated in the applicable prospectus
supplement, principal of, and any premium and interest on, the
subordinated debt securities of a particular series will be
payable at the office of the paying agent or paying agents that
we may designate from time to time. Unless otherwise indicated
in the applicable prospectus
supplement, the corporate trust office of the subordinated
trustee in The City of New York will be designated as our sole
paying agent for payments with respect to subordinated debt
securities of each series. Any other paying agents that we
initially designate for the subordinated debt securities of a
particular series will be named in the applicable prospectus
supplement. We may at any time designate additional paying
agents or rescind the designation of any paying agent or approve
change in the office through which any paying agent acts, except
that we will be required to maintain a paying agent in each
place of payment for the subordinated debt securities of a
particular series.
All moneys that we pay to a paying agent for the payment of the
principal of, or any premium or interest on, any subordinated
debt security that remain unclaimed at the end of two years
after the principal, premium or interest has become due and
payable will be repaid to us, and the holder of the subordinated
debt security may look only to us for payment of any principal,
premium or interest.
Restrictive
Covenants
We will include covenants specific to a particular series of
subordinated debt securities in the applicable prospectus
supplement.
Consolidation,
Merger and Sale of Assets
Unless otherwise specified in the applicable prospectus
supplement, the subordinated indentures will provide that Forest
City Enterprises, Inc. may not consolidate with or merge into,
or convey, transfer or lease its properties and assets
substantially as an entirety to, any entity, and may not permit
any entity to merge into, or convey, transfer or lease its
properties and assets substantially as an entirety to Forest
City Enterprises, Inc., unless all of the following conditions
are met.
•
If the successor entity is not Forest City Enterprises, Inc.,
the successor entity is a corporation, partnership, trust or
other entity organized and validly existing under the laws of
any domestic jurisdiction and expressly assumes Forest City
Enterprises, Inc.’s obligations on the subordinated debt
securities and under the subordinated indentures.
•
Immediately after giving effect to the transaction, and treating
any debt that becomes our obligation as a result of the
transaction as having been incurred by us at the time of the
transaction, no event of default, and no event that, after
notice or lapse of time or both, would become an event of
default, has occurred and is continuing.
•
If, as a result of the transaction, the properties or assets of
Forest City Enterprises, Inc. would become subject to a lien or
other encumbrance that would not be permitted by the applicable
subordinated indenture, Forest City Enterprises, Inc. or the
successor entity, as the case may be, takes the steps necessary
to secure the subordinated debt securities equally and ratably
with, or prior to, the indebtedness secured by the lien or other
encumbrance.
•
Forest City Enterprises, Inc. delivers to the subordinated
trustee an officers’ certificate and an opinion of counsel,
both of which state that the transaction complies with the terms
of the applicable subordinated indenture.
Events of
Default
Unless otherwise set forth in the applicable prospectus
supplement, each of the following will constitute an event of
default under the applicable subordinated indenture with respect
to subordinated debt securities of any series, if applicable:
•
failure to pay principal of, or premium, if any, on, any
subordinated debt security of that series when due, whether or
not the payment is prohibited by the subordination provisions of
the applicable subordinated indenture;
•
failure to pay any interest on any subordinated debt securities
of that series when due that continues for 30 days, whether
or not the payment is prohibited by the subordination provisions
of the applicable subordinated indenture;
failure to deposit any sinking fund payment when due on any
subordinated debt security of that series, whether or not the
deposit is prohibited by the subordination provisions of the
applicable subordinated indenture;
•
failure to perform any other covenant in the applicable
subordinated indenture, other than a covenant included in the
applicable subordinated indenture solely for the benefit of a
series other than that series, that continues for 60 days
after written notice has been given by the subordinated trustee
or the holders of at least 10% in aggregate principal amount of
the outstanding subordinated debt securities of that series as
provided in the applicable indenture;
•
a default under any recourse debt by us, individually or in the
aggregate, in excess of $10.0 million, which default
(1) constitutes a failure to pay when due, subject to any
applicable grace period, any portion of the principal of that
recourse debt, and (2) results in that recourse debt
becoming or being declared due and payable prior to its stated
maturity;
•
a default under any non-recourse debt by us, individually or in
the aggregate, in excess of 20% of the aggregate principal
amount of all of our outstanding non-recourse debt, which
default (1) constitutes a failure to pay when due, subject
to any applicable grace period, any portion of the principal of
that non-recourse debt, or (2) results in that non-recourse
debt becoming or being declared due and payable prior to its
stated maturity;
•
we or any of our significant subsidiaries file for bankruptcy,
or other events in bankruptcy, insolvency or reorganization
occur; and
•
any other event of default specified in the applicable
prospectus supplement.
If any event of default, other than an event of default relating
to bankruptcy, insolvency or reorganization, occurs and is
continuing, either the subordinated trustee or the holders of at
least 25% in aggregate principal amount of the outstanding
subordinated debt securities of the applicable series, by notice
as provided in the applicable subordinated indenture, may
declare the principal amount of the subordinated debt securities
of that series to be due and payable immediately. If an event of
default relating to bankruptcy, insolvency or reorganization
occurs, the principal amount of all the subordinated debt
securities of the applicable series, or, in the case of any
original issue discount security or other subordinated debt
security, a specified amount, will automatically, and without
any action by the subordinated trustee or any holder, become
immediately due and payable. However, after the acceleration,
but before a judgment or decree based on acceleration, the
holders of a majority in aggregate principal amount of the
outstanding subordinated debt securities of that series may,
under specified circumstances, rescind the acceleration if all
events of default, other than the non-payment of accelerated
principal, or other specified amount, have been cured or waived
as provided in the applicable subordinated indenture. For a more
detailed discussion as to waiver of defaults, see
“— Modification and Waiver.”
Subject to the provisions of the applicable subordinated
indenture relating to the duties of the subordinated trustee in
case an event of default occurs and is continuing, the
subordinated trustee will be under no obligation to exercise any
of its rights or powers under the applicable subordinated
indenture at the request or direction of any of the holders,
unless the holders have offered to the subordinated trustee
reasonable indemnity. Subject to the provisions of the
applicable subordinated indenture relating to the
indemnification of the subordinated trustee, the holders of a
majority in aggregate principal amount of the outstanding
subordinated debt securities of any series will have the right
to direct the time, method and place of conducting any
proceeding for any remedy available to the subordinated trustee
or exercising any trust or power conferred on the subordinated
trustee with respect to the subordinated debt securities of that
series.
No holder of a subordinated debt security of any series will
have any right to institute any proceeding with respect to the
applicable subordinated indenture, or for the appointment of a
receiver or a trustee, or for any other remedy thereunder,
unless:
•
the holder has previously given to the subordinated trustee
written notice of a continuing event of default with respect to
the subordinated debt securities of that series;
the holders of at least 25% in aggregate principal amount of the
outstanding subordinated debt securities of that series have
made a written request and offered reasonable indemnity to the
trustee to institute the proceeding as trustee;
•
the subordinated trustee has failed to institute the
proceeding; and
•
the subordinated trustee has not received from the holders of a
majority in aggregate principal amount of the outstanding
subordinated debt securities of that series a direction
inconsistent with the request within 60 days after the
notice, request and offer.
However, these limitations do not apply to a suit instituted by
a holder of a subordinated debt security for the enforcement of
payment of the principal of or any premium or interest on such
subordinated debt security on or after the applicable due date
specified in the debt security.
We will be required to furnish to the subordinated trustee
annually a statement as to whether or not we, to our knowledge,
are in default in the performance or observance of any of the
terms, provisions and conditions of each subordinated indenture
and, if so, specifying all known defaults.
Modification
and Waiver
Unless otherwise set forth in the applicable prospectus
supplement, we and the subordinated trustee may modify and amend
the applicable subordinated indenture with the consent of
holders of not less than a majority in aggregate principal
amount of any series of outstanding subordinated debt
securities, and, in some instances, we and the subordinated
trustee may modify and amend the subordinated indenture without
the consent of the holders of any series of outstanding
subordinated debt securities. However, we and the subordinated
trustee may not modify or amend the subordinated indenture
without the consent of the holder of each outstanding
subordinated debt security affected by the modification or
amendment if the modification or amendment:
•
changes the stated maturity of the principal of, or any
installment of principal of or interest on, any subordinated
debt security;
•
reduces the principal amount of, or any premium or interest on,
any subordinated debt security;
•
reduces the amount of principal of an original issue discount
security or any other subordinated debt security payable upon
acceleration of maturity;
•
changes the place or currency of payment of principal of, or any
premium or interest on, any subordinated debt security;
•
impairs the right to institute suit for the enforcement of any
payment on or with respect to any subordinated debt security;
•
reduces the percentage of outstanding subordinated debt
securities of any series, the consent of whose holders is
required for modification or amendment of the applicable
subordinated indenture;
•
reduces the percentage of outstanding subordinated debt
securities of any series necessary for waiver of compliance with
specified provisions of the applicable subordinated indenture or
for waiver of specified defaults;
•
modifies the provisions relating to modification and waiver in
any other respect except to increase any required percentage
referred to above or to add to the provisions that cannot be
changed or modified without the consent of the holders; or
•
in the case of convertible subordinated debt securities, makes
any change that adversely affects the right to convert any
subordinated debt security, except as permitted by the
applicable subordinated indenture, or decreases the conversion
rate or increases the conversion price of any subordinated debt
security.
Each subordinated indenture will provide that the holders of a
majority in aggregate principal amount of the outstanding
subordinated debt securities of any series may waive our
compliance with specified restrictive provisions of the
applicable subordinated indenture. The holders of a majority in
aggregate principal amount
of the outstanding subordinated debt securities of any series
may waive any past default with respect to that series under the
applicable subordinated indenture, except a default in the
payment of principal, premium or interest and specified
covenants and provisions of the applicable subordinated
indenture that cannot be amended without the consent of the
holder of each outstanding subordinated debt security of the
affected series.
Defeasance
and Discharge
The applicable subordinated indenture will provide that, upon
the exercise of our option, we will be discharged from all our
obligations with respect to any subordinated debt securities of
a series, including the provisions relating to subordination,
except for the following obligations:
•
to exchange or register the transfer of subordinated debt
securities;
•
to replace stolen, lost or mutilated subordinated debt
securities;
•
to maintain paying agencies; and
•
to hold moneys for payment in trust, upon the deposit in trust
for the benefit of the holders of the subordinated debt
securities of money or United States government obligations, or
both, in an amount sufficient to pay the principal of, and any
premium and interest on, the subordinated debt securities of
that series on the stated maturity in accordance with the terms
of the applicable subordinated indenture and the subordinated
debt securities of that series.
We may only exercise defeasance or discharge if, among other
things, we have delivered to the subordinated trustee an opinion
of counsel to the effect that we have received from, or there
has been published by, the Internal Revenue Service a ruling, or
there has been a change in tax law, in either case to the effect
that holders of the subordinated debt securities of a relevant
series will not recognize gain or loss for federal income tax
purposes as a result of the deposit, defeasance and discharge
and will be subject to federal income tax on the same amount, in
the same manner and at the same times as would have been the
case if the deposit, defeasance and discharge were not to occur.
Covenant
Defeasance
The applicable subordinated indenture will provide that, at our
option, we may omit to comply with specified restrictive
covenants related to the subordinated debt securities of a
series, including any that may be described in the applicable
prospectus supplement, and the occurrence of specific events of
default that are described above under “— Events
of Default” and any that may be described in the applicable
prospectus supplement that are related to the subordinated debt
securities, will be deemed not to be or result in an event of
default. If this occurs, the provisions relating to
subordination will cease to be effective with respect to any
subordinated debt securities. We may only exercise this option
if we deposit, in trust for the benefit of the holders of the
subordinated debt securities of that series, money or United
States government obligations, or both, in an amount sufficient
to pay the principal of, and any premium and interest on, the
subordinated debt securities on the stated maturity in
accordance with the terms of the applicable subordinated
indenture and the subordinated debt securities of that series.
We also must, among other things, deliver to the subordinated
trustee an opinion of counsel to the effect that holders of the
subordinated debt securities of the relevant series will not
recognize gain or loss for federal income tax purposes as a
result of the deposit and defeasance of specified obligations
and will be subject to federal income tax on the same amount, in
the same manner and at the same times as would have been the
case if the deposit and defeasance were not to occur.
If we exercise this option with respect to any subordinated debt
securities of a series and the subordinated debt securities are
declared due and payable because of the occurrence of any event
of default, the amount of money and United States government
obligations so deposited in trust may be insufficient to pay
amounts due on the subordinated debt securities at the time of
their respective stated maturities but is not sufficient to pay
amounts due on the subordinated debt securities of that series
at the time of the acceleration. In such a case, we would remain
liable for the deficiency.
Unless otherwise set forth in the applicable prospectus
supplement, notices to the holders of subordinated debt
securities will be given by mail to the addresses of those
holders as they may appear in the security register.
Title
Unless otherwise set forth in the applicable prospectus
supplement, we, the subordinated trustee and any agents of ours
or the subordinated trustee may treat the person in whose name a
subordinated debt security is registered as the absolute owner
of the subordinated debt security, whether or not the
subordinated debt security may be overdue, for the purpose of
making payment and for all other purposes.
Relationships
with the Subordinated Trustee
The subordinated trustee under the senior subordinated indenture
and the junior subordinated indenture will be specified in a
prospectus supplement.
Governing
Law
The subordinated indentures and the subordinated debt securities
will be governed by, and construed in accordance with, the law
of the State of New York, unless otherwise indicated in the
applicable prospectus supplement.
This section describes the general terms and provisions of the
preferred stock that we may issue separately, upon conversion of
a senior debt security, upon conversion of a subordinated debt
security or upon exercise of an equity warrant. The applicable
prospectus supplement will describe the specific terms, or
modify the general terms, of any shares of preferred stock
offered through that prospectus supplement and any special
federal income tax consequences of those shares of preferred
stock. We will file an amendment to our Amended Articles of
Incorporation that contains the terms of each series of
preferred stock each time we issue a new series of preferred
stock. This amendment will establish the number of shares
included in a designated series and fix the designation, powers,
privileges, preferences and rights of the shares of each series
as well as any applicable qualifications, limitations or
restrictions, including any dividend, redemption, liquidation,
sinking fund and conversion rights. The description set forth
below is not complete and is subject to the amendments to our
Amended Articles of Incorporation fixing the preferences,
limitations and relative rights of a particular series of
preferred stock. You should refer to these amendments for
specific information on the preferred stock. See “Where You
Can Find More Information” for information on how to obtain
copies of amendments to our Amended Articles of Incorporation.
General
Under our Amended Articles of Incorporation, our board of
directors is authorized to issue up to 10,000,000 shares of
preferred stock, without par value, in multiple series without
the approval of shareholders with any designation, powers,
privileges, preferences and rights, as well as any applicable
qualifications, limitations or restrictions, as may be fixed by
the board of directors.
The preferred stock we may offer, if any, will have the
dividend, redemption, liquidation, sinking fund and conversion
rights set forth below unless otherwise provided in the
applicable prospectus supplement. You should refer to the
applicable prospectus supplement relating to the particular
series of preferred stock offered by that prospectus supplement
for specific terms, which may include:
•
the designation and authorized number of shares of each series;
•
the title and liquidation preference per share;
•
the number of shares offered;
•
the price at which the shares of each series will be issued;
the dividend rate, if any, the dates on which we will pay
dividends and the dates from which dividends will commence to
accumulate;
•
any redemption or sinking fund provisions of each series;
•
any conversion or exchange rights; and
•
any additional dividend, liquidation, redemption, sinking fund
and other rights, preferences, privileges, limitations and
restrictions of each series.
The shares of preferred stock will be, when issued, fully paid
and nonassessable. Unless otherwise specified in the applicable
prospectus supplement, each series will rank on a parity as to
dividends and distributions in the event of a liquidation with
each other series of preferred stock and, in all cases, will be
senior to our Class A common stock and our Class B
common stock.
Dividend
Rights
Unless otherwise set forth in the applicable prospectus
supplement, holders of preferred stock of each series will be
entitled to receive, when, as and if declared by our board of
directors, out of our assets legally available for the payment
of dividends, cash dividends at the rates and on the dates as
set forth in the applicable prospectus supplement. Holders of
preferred stock will be entitled to receive dividends in
preference to and in priority over dividends on common stock and
may be cumulative or non-cumulative as determined by our board
of directors. We will generally be able to pay dividends and
distribute assets to holders of our preferred stock only if we
have satisfied our obligations on our debt that is then due and
payable.
If the applicable prospectus supplement so provides, as long as
any shares of preferred stock are outstanding, no dividends will
be declared or paid or any distributions be made on our
Class A or Class B common stock unless the accrued
dividends on each series of preferred stock have been declared
and paid.
Each series of preferred stock will be entitled to dividends as
described in the applicable prospectus supplement. Different
series of preferred stock may be entitled to dividends at
different dividend rates or based upon different methods of
determination. Except as provided in the applicable prospectus
supplement, no series of preferred stock will be entitled to
participate in our earnings or assets.
Rights
Upon Liquidation
Upon any dissolution, liquidation or “winding up” of
Forest City Enterprises, Inc., the holders of each series of
preferred stock will be entitled to receive out of its assets,
whether from capital, surplus or earnings, and before any
distribution of any assets is made on Class A common stock
or Class B common stock, the amount per share fixed by the
board of directors for that series of preferred stock, as
reflected in the applicable prospectus supplement, plus unpaid
dividends, if any, to the date fixed for distribution. Unless
otherwise indicated in the applicable prospectus supplement,
holders of preferred stock will be entitled to no further
participation in any distribution made in conjunction with any
dissolution, liquidation or “winding up.”
Redemption
A series of preferred stock may be redeemable, in whole or in
part, at our option, and may be subject to mandatory redemption
in connection with a sinking fund. The terms, times, redemption
prices and types of consideration of the redemption will be set
forth in the applicable prospectus supplement. The applicable
prospectus supplement will also specify the number of shares of
the series that we will redeem in each year commencing after a
specified date, at a specified redemption price per share,
together with an amount equal to any accrued and unpaid
dividends to the date of redemption.
If, after giving notice of redemption to the holders of a series
of preferred stock, we deposit with a designated bank funds
sufficient to redeem the series of preferred stock, then from
and after the deposit, all shares called for redemption will no
longer be outstanding for any purpose, other than the right to
receive the redemption price and the right, if applicable, to
convert the shares of preferred stock into our Class A
common stock or other securities prior to the date fixed for
redemption.
Except as indicated in the applicable prospectus supplement, the
preferred stock is not subject to any mandatory redemption at
the option of the holder.
Sinking
Fund
The applicable prospectus supplement for any series of preferred
stock will state the terms, if any, of a sinking fund for the
purchase or redemption of that series.
Conversion
Rights
The applicable prospectus supplement for any series of preferred
stock will state the terms, if any, on which shares of that
series are convertible into shares of Class A common stock
or, if applicable, other securities. Unless otherwise indicated
in the applicable prospectus supplement, the preferred stock
will have no preemptive rights.
Voting
Rights
Under ordinary circumstances, the holders of preferred stock
have no voting rights except as required by law. However, if
dividends on the preferred stock are in arrears for an aggregate
of six quarterly dividends, the holders of the preferred stock,
voting as a class, will become entitled to elect two directors
until the time as the arrearages are paid and current dividends
paid or declared and funded. The applicable prospectus
supplement may provide additional voting rights for holders of
preferred stock.
Transfer
Agent and Registrar
We will select the transfer agent, registrar and dividend
disbursement agent for a series of preferred stock, and each one
will be described in the applicable prospectus supplement. The
registrar for shares of preferred stock will send notices to
shareholders of any meetings at which holders of preferred stock
have the right to vote on any matter.
We may, at our option, elect to offer fractional shares of
preferred stock rather than full shares of preferred stock. If
we do elect to offer fractional shares of preferred stock, we
will issue depositary shares that each represent a fraction of a
share of a particular series of preferred stock. This section
describes the general terms and provisions of the depositary
shares that we may issue. The applicable prospectus supplement
will describe the specific terms, or modify the general terms,
of any depositary shares offered through that prospectus
supplement and any special federal income tax consequences of
those depositary shares.
The statements and descriptions in this prospectus, in any
prospectus supplement or in any other offering material
regarding provisions of any deposit agreement between us and a
depositary is a summary thereof, does not purport to be complete
and is subject to, and is qualified in its entirety by reference
to, all of the provisions of the applicable deposit agreement
(and any amendments we may enter into from time to time) and the
depositary shares, including the definitions therein of certain
terms.
Unless we specify otherwise in the applicable prospectus
supplement, such deposit agreement will be in the form filed as
an exhibit to, or incorporated by reference in the registration
statement (including amendments to such registration statement)
of which this prospectus is a part, subject to any amendments to
such deposit agreement as we may adopt from time to time.
General
The shares of any series of preferred stock represented by
depositary shares will be deposited under a deposit agreement
between us and a depositary named in the applicable prospectus
supplement. Subject to the terms of the deposit agreement, each
owner of a depositary share will be entitled, in proportion to
the applicable fraction of a share of preferred stock
represented by the depositary share, to all the rights and
preferences of the preferred stock represented by the depositary
shares, including dividend, voting, redemption, subscription and
liquidation rights.
The depositary shares will be evidenced by depositary receipts
issued under the deposit agreement. Depositary receipts will be
distributed to those persons purchasing the fractional shares of
preferred stock in accordance with the terms of the offering.
Pending the preparation of definitive depositary receipts, the
depositary may, upon our written order, issue temporary
depositary receipts substantially identical to, and entitling
the holders to all the rights pertaining to, definitive
depositary receipts but not in definitive form. Definitive
depositary receipts will be prepared thereafter without
unreasonable delay, and temporary depositary receipts will be
exchangeable for definitive depositary receipts at our expense.
Dividends
and Other Distributions
The depositary will distribute all cash dividends or other cash
distributions received on the preferred stock to the record
holders of depositary shares relating to the preferred stock in
proportion to the number of the depositary shares owned by the
holders of the depositary shares. The depositary will distribute
only the amount, however, as can be distributed without
attributing to any holder of depositary shares a fraction of one
cent, and the balance not so distributed will be held by the
depositary, without liability for interest thereon, and will be
added to and treated as part of the sum next received by the
depositary for distribution to record holders of depositary
shares.
In the event of a distribution other than in cash, the
depositary will distribute property received by it to the record
holders of depositary shares entitled to the distribution, in
amounts as are, as nearly as practicable, in proportion to the
number of depositary shares owned by each holder, unless the
depositary determines that it is not feasible to make the
distribution. In that case, the depositary may, with our
approval, adopt any method that it deems equitable and
practical, including the sale of the property and the
distribution of the net proceeds from the sale to the holders of
depositary shares.
The deposit agreement will also contain provisions relating to
the manner in which any subscription or similar rights we offer
to holders of the preferred stock will be made available to the
holders of depositary shares.
Withdrawal
of Preferred Stock
Unless the related depositary shares have previously been called
for redemption, the holder of the depositary shares may receive
the number of whole shares of the related series of preferred
stock and any money or other property represented by the
depositary shares after surrendering the depositary receipts at
the corporate trust office of the depositary, paying taxes,
charges and fees provided for in the deposit agreement and
complying with any other requirements of the deposit agreement.
Holders of depositary shares making these withdrawals will be
entitled to receive whole shares of the related series of
preferred stock on the basis set forth in the applicable
prospectus supplement for the series of preferred stock, but
holders of whole shares of the preferred stock will not be
entitled to receive depositary shares at a later time in
exchange for whole shares of preferred stock. If the depositary
receipts delivered by the holder evidence a number of depositary
shares in excess of the number of depositary shares representing
the number of whole shares of the related series of preferred
stock to be withdrawn, the depositary will deliver to the holder
at the same time a new depositary receipt evidencing the excess
number of depositary shares.
Redemption
of Depositary Shares
If we redeem a series of preferred stock represented by
depositary shares, the depositary will redeem the depositary
shares from the proceeds it receives from the redemption, in
whole or in part, of the series of preferred stock held by the
depositary in accordance with the terms of the deposit
agreement. Whenever we redeem shares of preferred stock held by
the depositary, the depositary will redeem, as of the same
redemption date, the number of depositary shares representing
shares of preferred stock so redeemed. If fewer than all the
depositary shares are to be redeemed, the depositary shares to
be redeemed will be selected by lot or pro rata as may be
determined by the depositary or by any other method that may be
determined by the depositary to be equitable.
After the date fixed for redemption, the depositary shares
called for redemption will no longer be outstanding, and all
rights of the holders of the depositary shares will cease,
except the right to receive the money, securities or other
property payable upon redemption and any money, securities, or
other property to which the holders of the depositary shares
were entitled upon redemption. To receive this money, securities
or property, the holder must surrender the depositary receipts
evidencing the depositary shares to the depositary.
Upon receipt of notice of any meeting at which the holders of
any series of preferred stock are entitled to vote, the
depositary will mail the information contained in the notice of
meeting to the record holders of the depositary shares relating
to the applicable series of preferred stock. Each record holder
of the depositary shares on the record date for that series of
preferred stock will be entitled to instruct the depositary as
to the exercise of the voting rights pertaining to the amount of
whole shares of that series of preferred stock represented by
the holder’s depositary shares. The depositary will
attempt, as practicable, to vote the amount of whole shares of
that series of preferred stock represented by the depositary
shares in accordance with each holder’s instructions. We
will agree to take all reasonable action that may be deemed
necessary by the depositary in order to enable the depositary to
do so. The depositary will abstain from voting shares of the
preferred stock to the extent that it does not receive specific
instructions from the holder of depositary shares representing
that series of preferred stock.
Amendment
and Termination of the Deposit Agreement
We and the depositary may amend the form of depositary receipt
evidencing the depositary shares and any provision of the
deposit agreement at any time. However, any amendment that
materially and adversely alters the rights of the holders of
depositary shares will not be effective unless the amendment has
been approved by the holders of at least a majority of the
affected depositary shares then outstanding under the deposit
agreement. We or the depositary may terminate the deposit
agreement only if:
•
all outstanding depositary shares under the deposit agreement
have been redeemed; or
•
there has been a final distribution on the preferred stock in
connection with any liquidation, dissolution or winding up of
Forest City Enterprises, Inc. and the distribution has been
distributed to the holders of depositary receipts.
Charges
and Expenses of Depositary
We will pay all transfer and other taxes and governmental
charges arising solely from the existence of the depositary
arrangements. We will pay charges of the depositary in
connection with the initial deposit of the preferred stock, any
redemption of the preferred stock at our option and any
withdrawals of preferred stock by the holders of depositary
shares. Holders of depositary receipts will pay all other
transfer and other taxes and governmental charges and any other
charges as may be expressly provided in the deposit agreement to
be for their accounts.
Resignation
and Removal of Depositary
The depositary may resign at any time by delivering to us notice
of its election to do so, and we may at any time remove the
depositary. Any resignation or removal of the depositary will
take effect upon the appointment of a successor depositary and
its acceptance of the appointment as provided in the deposit
agreement. The successor depositary must be appointed within
60 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and
surplus of at least $50.0 million.
Miscellaneous
We will deliver, at our expense, all notices and reports
required by law, by the rules of any national securities
exchange upon which the preferred stock, the depositary shares
or the depositary receipts are listed or by our Amended Articles
of Incorporation to be furnished to the record holders of
preferred stock.
As provided in the deposit agreement, neither we nor the
depositary will be liable if prevented or delayed by law or any
other circumstance beyond our or its control in performing
obligations under the deposit agreement. Our obligations and
those of the depositary under the deposit agreement will be
limited to performance in good faith of the duties thereunder.
The depositary will not be obligated to prosecute or defend any
legal proceeding on any depositary shares or preferred stock
unless satisfactory indemnity is furnished. We and the
depositary may rely upon written advice of counsel or
accountants, or upon information provided by persons presenting
preferred stock for deposit, holders of depositary receipts or
other persons believed to be competent and on documents believed
to be genuine.
This section describes the general terms and provisions of the
shares of our Class A common stock that we may issue
separately, upon conversion of a senior debt security, upon
conversion of a subordinated debt security, upon conversion of
preferred stock or upon exercise of an equity warrant. The
description set forth below of our Class A common stock and
Class B common stock is not complete and is subject to our
Amended Articles of Incorporation. You should refer to our
Amended Articles of Incorporation for specific information about
our Class A common stock. See “Where You Can Find More
Information” for information on how to obtain a copy of our
Amended Articles of Incorporation.
Our Amended Articles of Incorporation authorize the issuance of
271,000,000 shares of our Class A common stock, of
which, at March 20, 2009, 80,200,477 shares were
issued, 3,967 shares were held in treasury and
80,196,510 shares were outstanding and were held of record
by 720 shareholders, and 56,000,000 shares of our
Class B common stock, convertible on a
share-for-share
basis into Class A common stock, of which, at
March 20, 2009, 22,686,427 shares were issued, no
shares were held in treasury and 22,686,427 shares were
outstanding and were held of record by 444 shareholders.
General
Except as described below, the shares of our Class A common
stock and the shares of our Class B common stock are in all
respects identical. The holders of our Class A common stock
and Class B common stock are entitled to participate in any
dividend, reclassification, merger, consolidation,
reorganization, recapitalization, liquidation, dissolution or
winding up of our affairs,
share-for-share,
without priority or other distinction between classes.
Both the Class A common stock and Class B common stock
are listed on the New York Stock Exchange. As of March 20,2009, Class A common stock accounted for approximately 78%
of the total number of shares of common stock outstanding.
Dividends
Our board of directors is not required to declare a regular cash
dividend in any fiscal year. The Class A common stock and
Class B common stock will participate equally on a
share-for-share
basis in any and all cash and non-cash dividends paid, other
than as described below. No cash dividend can be paid on a class
of common stock until provision is made for payment of a
dividend of at least an equal amount on a
share-for-share
basis on the other class of common stock. If our board of
directors determines to declare any stock dividend with respect
to either class of common stock, it must at the same time
declare a proportionate stock dividend with respect to the other
class of common stock. If the shares of either class of common
stock are combined or subdivided, the shares of the other class
of common stock must be combined or subdivided in an equivalent
manner. In the discretion of our board of directors, dividends
payable in Class A common stock may be paid with respect to
shares of either class of common stock, but dividends payable in
Class B common stock may be paid only with respect to
shares of our Class B common stock.
Voting
Rights
The holders of the Class A common stock, voting as a
separate class, are entitled to elect 25% of the directors
rounded up to the nearest whole number. All other directors are
elected by the holders of the Class B common stock voting
as a separate class. Cumulative voting for the election of
directors is provided by Ohio law if notice in writing is given
by any shareholder to the president, a vice president or the
secretary not less than 48 hours before the time fixed for
the holding of the meeting that the shareholder desires
cumulative voting with respect to the election of directors by a
class of shareholders to which he belongs, and if an
announcement of the giving of the notice is made upon the
convening of the meeting by the chairman or secretary or by or
on behalf of the shareholder giving the notice. If cumulative
voting is in effect for a class, each holder of shares of that
class will have the right to accumulate the voting power that he
possesses at the election with respect to shares of that class.
This means that each holder of shares of our Class A common
stock or Class B common stock, as the case may be, will
have as many votes as equal the number of shares of that class
of common stock owned by the holder multiplied by the number of
directors to be elected by the holders of that class of common
stock. These votes may be distributed among the total number of
directors to be elected by the holders of that class of common
stock or distributed among any lesser number, in the proportion
as the holder may desire.
If that the number of outstanding shares of our Class A
common stock is, as of the record date for any shareholder
meeting at which directors will be elected, less than 10% of the
combined outstanding shares of our Class A and Class B
common stock, then the holders of our Class A common stock
will not have the right to elect 25% of the directors. If this
occurs, the holders of our Class A common stock and the
holders of our Class B common stock would vote together as
a single class in the election of all directors, with each
Class A share having one vote and each Class B share
having ten votes.
Further, if that the number of outstanding shares of our
Class B common stock as of the above-mentioned record date
is less than 500,000 shares, the holders of our
Class B common stock will not have the right to elect 75%
of the directors. If this occurs, the holders of our
Class A common stock would continue to vote as a separate
class to elect 25% of the directors rounded up to the nearest
whole number, and the holders of our Class A and
Class B common stock would vote together as a single class
in the election of the remaining directors, with each
Class A share having one vote and each Class B share
having ten votes.
The holders of our Class A common stock and the holders of
our Class B common stock are entitled to vote as separate
classes:
•
for the election of directors (subject to exceptions described
above);
•
to amend our Amended Articles of Incorporation or our Code of
Regulations or approve a merger or consolidation of us with or
into another corporation if the amendment, merger or
consolidation would adversely affect the rights of the
particular class; and
•
on all matters as to which class voting may be required by
applicable Ohio law.
The holders of the Class A common stock vote together with
the holders of the Class B common stock as a single class
on all matters that are submitted to shareholder vote, except as
discussed above. When all holders of our shares vote as a single
class, each Class A share has one vote and each
Class B share has ten votes.
Conversion
Holders of shares of our Class B common stock are entitled
to convert, at any time and at their election, each share of
Class B common stock into one share of our Class A
common stock. Shares of Class A common stock are not
convertible.
Other
Terms
Our shareholders have no preemptive or other rights to subscribe
for additional shares of our voting securities, except for the
conversion rights of Class B common stock described above
and conversion or put rights that may be granted to holders of
our debt securities and preferred stock, if any. Upon any
liquidation, dissolution or winding up of Forest City
Enterprises, Inc., the assets legally available for distribution
to holders of all classes of common stock are distributable
ratably among the holders of the shares of all classes of common
stock outstanding at the time. No class of common stock is
subject to redemption.
Transfer
Agent
National City Bank, Cleveland, Ohio, currently serves as
transfer agent for our common stock.
This section describes the general terms and provisions of the
warrants we may issue for the purchase of senior debt
securities, subordinated debt securities, Class A common
stock or preferred stock. We may issue warrants independently or
together with other securities offered by any prospectus
supplement and may attach warrants to those securities. Each
series of warrants will be issued under a separate warrant
agreement to be entered into between us and a bank or trust
company, as warrant agent, all as set forth in the applicable
prospectus supplement relating to the particular issue of the
warrants. The warrant agent will act solely as our agent in
connection with warrant certificates evidencing the warrants and
will not assume any obligation or relationship of agency or
trust for or with any holders of certificates evidencing
warrants or beneficial owners of warrants.
Unless we specify otherwise in the applicable prospectus
supplement, such warrant agreement will be in the form filed as
an exhibit to, or incorporated by reference in the registration
statement (including amendments to such registration statement)
of which this prospectus is a part, subject to any amendments to
such warrant agreement as we may adopt from time to time.
Debt
Warrants
The applicable prospectus supplement relating to a particular
issue of warrants to issue debt securities will describe the
terms of those warrants, including the following, if applicable:
•
the title of the warrants;
•
the offering price for the warrants, if any;
•
the aggregate number of the warrants;
•
the designation and terms of the debt securities purchasable
upon exercise of the warrants;
•
the designation and terms of the debt securities that the
warrants are issued with and the number of warrants issued with
each debt security;
•
the date from and after which the warrants and any debt
securities issued with them will be separately transferable;
•
the principal amount of debt securities that may be purchased
upon exercise of a warrant and the price at which the debt
securities may be purchased upon exercise;
•
the dates on which the right to exercise the warrants will
commence and expire;
•
the minimum or maximum amount of the warrants that may be
exercised at any one time;
•
whether the warrants represented by the warrant certificates or
debt securities that may be issued upon exercise of the warrants
will be issued in registered or bearer form;
•
information relating to book-entry procedures, if any;
•
the currency or currency units in which the offering price, if
any, and the exercise price are payable;
•
a discussion of material United States federal income tax
considerations;
•
anti-dilution provisions of the warrants, if any;
•
redemption or call provisions, if any, applicable to the
warrants;
•
any additional terms of the warrants, including terms,
procedures and limitations relating to the exchange and exercise
of the warrants; and
•
any other information we think is important about the warrants.
Equity
Warrants
The applicable prospectus supplement relating to a particular
issue of warrants to issue shares of preferred stock, shares of
Class A common stock, or other securities will describe the
terms of those warrants, including the following, if applicable:
•
the title of the warrants;
•
the offering price for the warrants, if any;
•
the aggregate number of the warrants;
•
the designation and terms of the securities that may be
purchased upon exercise of the warrants;
•
the designation and terms of the securities that the warrants
are issued with and the number of warrants issued with each
security;
the date from and after which the warrants and any securities
issued with the warrants will be separately transferable;
•
the number of securities that may be purchased upon exercise of
a warrant and the price at which the securities may be purchased
upon exercise;
•
the dates on which the right to exercise the warrants will
commence and expire;
•
the minimum or maximum amount of the warrants that may be
exercised at any one time;
•
the currency or currency units in which the offering price, if
any, and the exercise price are payable;
•
a discussion of material United States federal income tax
considerations;
•
anti-dilution provisions of the warrants, if any;
•
redemption or call provisions, if any, applicable to the
warrants;
•
any additional terms of the warrants, including terms,
procedures and limitations relating to the exchange and exercise
of the warrants; and
•
any other information we think is important about the warrants.
Exercise
of Warrants
Each warrant will entitle the holder of the warrant to purchase
at the exercise price set forth in the applicable prospectus
supplement the principal amount of debt securities or applicable
number of securities being offered. Holders may exercise
warrants at any time up to the close of business on the
expiration date set forth in the applicable prospectus
supplement. After the close of business on the expiration date,
unexercised warrants are void. Holders may exercise warrants as
set forth in the prospectus supplement relating to the warrants
being offered.
Until a holder exercises the warrants to purchase our
securities, the holder will not have any rights as a holder of
the securities by virtue of ownership of warrants.
the purchase price or initial public offering price of the
securities;
•
the net proceeds from the sale of the securities;
•
any delayed delivery arrangements;
•
any underwriting discounts, commissions and other items
constituting underwriters’ compensation;
•
any discounts or concessions allowed or reallowed or paid to
dealers; and
•
any commissions paid to agents.
Sale
Through Underwriters or Dealers
If underwriters are used in the sale, the underwriters will
acquire the securities for their own account for resale to the
public, either on a firm-commitment or best-efforts basis. The
underwriters may resell the securities from time to time in one
or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at
the time of sale. Underwriters may offer securities to the
public either through underwriting syndicates represented by one
or more managing underwriters or directly by one or more firms
acting as underwriters. Unless we inform you otherwise in the
applicable prospectus supplement, the obligations of the
underwriters to purchase the securities will be subject to
specified conditions, and the underwriters will be obligated to
purchase all the offered securities if they purchase any of
them. The underwriters may change from time to time any initial
public offering price and any discounts or concessions allowed
or reallowed or paid to dealers.
If we offer securities in a subscription rights offering to our
existing security holders, we may enter into a standby
underwriting agreement with dealers, acting as standby
underwriters. We may pay the standby underwriters a commitment
fee for the securities they commit to purchase on a standby
basis. If we do not enter into a standby underwriting
arrangement, we may retain a dealer-manager to manage a
subscription rights offering for us.
During and after an offering through underwriters, the
underwriters may purchase and sell the securities in the open
market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover syndicate short
positions created in connection with the offering. The
underwriters may also impose a penalty bid, which means that
selling concessions allowed to syndicate members or other
broker-dealers for the offered securities sold for their account
may be reclaimed by the syndicate if the offered securities are
repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or
otherwise affect the market price of the offered securities,
which may be higher than the price that might otherwise prevail
in the open market. If commenced, the underwriters may
discontinue these activities at any time.
Some or all of the securities that we offer though this
prospectus may be new issues of securities with no established
trading market. Any underwriters to whom we sell our securities
for public offering and sale may make a market in those
securities, but they will not be obligated to do so and they may
discontinue any market making at any time without notice.
Accordingly, we cannot assure you of the liquidity of, or
continued trading markets for, any securities that we offer.
If dealers are used in the sale of securities, we will sell the
securities to them as principals. They may then resell those
securities to the public at varying prices determined by the
dealers at the time of resale. We will include in the applicable
prospectus supplement the names of the dealers and the terms of
the transaction.
Direct
Sales and Sales Through Agents
We may sell the securities directly. In this case, no
underwriters or agents would be involved. We may also sell the
securities through agents designated from time to time. In the
applicable prospectus supplement, we will name any agent
involved in the offer or sale of the offered securities, and we
will describe any commissions payable to the agent. Unless we
inform you otherwise in the applicable prospectus supplement,
any agent will agree to use its reasonable best efforts to
solicit purchases for the period of its appointment.
We may sell the securities directly to institutional investors
or others who may be deemed to be underwriters within the
meaning of the Securities Act of 1933 with respect to any sale
of those securities. We will describe the terms of any sales of
these securities in the applicable prospectus supplement.
Offered securities may also be offered and sold, if so indicated
in the applicable prospectus supplement, in connection with a
remarketing upon their purchase, in accordance with a redemption
or repayment pursuant to their terms, or otherwise, by one or
more remarketing firms, acting as principals for their own
accounts or as agents for us. Any remarketing firm will be
identified and the terms of its agreements, if any, with us, and
its compensation will be described in the applicable prospectus
supplement.
If we so indicate in the applicable prospectus supplement, we
may authorize agents, underwriters or dealers to solicit offers
from specified types of institutions to purchase securities from
us at the public offering price under delayed delivery
contracts. These contracts would provide for payment and
delivery on a specified date in the future. The contracts would
be subject only to those conditions described in the applicable
prospectus supplement. The applicable prospectus supplement will
describe the commission payable for solicitation of those
contracts.
Derivative
Transactions
We may sell securities as part of, or in connection with, our
entering into a derivative transaction with a financial
institution. The financial institution may hedge its position by
making sales of securities covered by this prospectus.
General
Information
We may have agreements with the agents, dealers, underwriters
and remarketing firms to indemnify them against specified civil
liabilities, including liabilities under the Securities Act of
1933, or to contribute with respect to payments that the agents,
dealers, underwriters or remarketing firms may be required to
make. Agents, dealers, underwriters and remarketing firms may be
customers of, engage in transactions with or perform services
for us in the ordinary course of their businesses.
At-the-Market
Offerings
We may offer our securities into an existing trading market on
the terms described in the applicable prospectus supplement.
Underwriters and dealers may participate in any
at-the-market
offerings.
Unless otherwise indicated in the applicable prospectus
supplement, various legal matters incident to the issuance and
validity of the securities offered by the applicable prospectus
supplement are subject to the opinions of Geralyn Presti, Senior
Vice President, our General Counsel and Secretary, and Thompson
Hine LLP, Cleveland, Ohio. As of March 20, 2009,
Ms. Presti owned 14,729 shares of our Class A
common stock, including 6,674 restricted shares,
1,238 shares of our Class B common stock and 53,701
options to purchase shares of our Class A common stock. In
addition, counsel that will be named in the applicable
prospectus supplement will pass upon the validity of any
securities offered under the applicable prospectus supplement
for any underwriters or agents.
The financial statements and management’s assessment of the
effectiveness of internal control over financial reporting
(which is included in Management’s Report on Internal
Control over Financial Reporting) incorporated in this
prospectus by reference to the Annual Report on
Form 10-K
of Forest City Enterprises, Inc. for the fiscal year ended
January 31, 2009 have been so incorporated in reliance on
the reports of PricewaterhouseCoopers LLP, an independent
registered public accounting firm, given on the authority of
said firm as experts in auditing and accounting.
