-01 -02 UNDER THE SECURITIES ACT OF 1933March 9, 2004January 20, 2006Registration No. 333-111073333- 333-111073-01333- 333-111073-02333-111073-03Amendment No. 2TOFORMForm S-3charter or certificate of trust)
charter)
Hawaii | 99-0040500 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Hawaii | 99-0041070 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Hawaii | 99-0047800 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
HECO CAPITAL TRUST III
(Exact name of registrant as specified in its charter or certificate of trust)
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c/o The Bank of New York, 101 Barclay Street, 8W, New York, New York 10286
Attention: Corporate Trust Administration, (212) 815-5084
(Address, including zip code, and telephone number, including area code, of principal executive offices)
RICHARD A. VON GNECHTEN
543-7840
| David J. Reber, Esq. | Jeffrey J. Delaney, Esq. | |
| Goodsill Anderson Quinn & Stifel | Pillsbury Winthrop Shaw Pittman LLP | |
| A Limited Liability Law Partnership LLP | 1540 Broadway | |
| 1099 Alakea Street | ||
| (212) 858-1000 | ||
| (808) 547-5600 |
As soon as practicable after the effective date of this Registration Statement.
| Proposed Maximum | Proposed Maximum | ||||||||||||
| Title of Each Class of Securities | Amount to be | Offering Price Per | Aggregate Offering | Amount of | |||||||||
| to be Registered | Registered | Unit(1)(2) | Price(1)(2) | Registration Fee | |||||||||
| Hawaiian Electric Company, Inc. Notes | $100,000,000 | 100% | $100,000,000 | $10,700 | |||||||||
| Hawaii Electric Light Company, Inc. Notes | $50,000,000 | 100% | $50,000,000 | $5,350 | |||||||||
| Maui Electric Company, Limited Notes | $15,000,000 | 100% | $15,000,000 | $1,605 | |||||||||
| Hawaiian Electric Company, Inc. Guarantees with respect to the Hawaii Electric Light Company, Inc. Notes and the Maui Electric Company, Limited Notes | (3) | (3) | (3) | (3) | |||||||||
| Total | $165,000,000 | 100% | $165,000,000 | $17,655 | |||||||||
| (1) | Estimated solely for the purpose of determining the registration fee. |
| (2) | Exclusive of accrued interest, if any. |
| (3) | Pursuant to Rule 457(n), no separate fee is payable for the Guarantees. |
CALCULATION OF REGISTRATION FEE
| Title of Each Class of Securities to be Registered | Amount to be | Proposed Per Unit(1)(2) | Proposed Maximum Aggregate Offering Price(1)(2) | Amount of Registration Fee | ||||
Cumulative Quarterly Income Preferred Securities of HECO Capital Trust III (“QUIPS”) | 2,000,000(3) | $25.00(3) | $50,000,000(3) | $8,090(8) | ||||
HECO, MECO and HELCO Junior Subordinated Deferrable Interest Debentures (“QUIDS”) | (3)(4) | (3)(4) | (3)(4) | |||||
HECO Guarantee with respect to the QUIPS(5)(7) | (6) | (6) | (6) | |||||
HECO Guarantees of MECO and HELCO QUIDS(7) | (6) | (6) | (6) | |||||
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
2,000,000 Preferred Securities
HECO Capital Trust III
% Cumulative Quarterly Income Preferred Securities,
Series 2004 (QUIPSSM)*
(Liquidation Preference $25 per QUIPS)
Fully and unconditionally guaranteed, as set forth herein, by
January 20, 2006.
The QUIPS offered
| $50,000,000 | $15,000,000 | ||
| Hawaii Electric Light | Maui Electric Company, | ||
| Company, Inc. | Limited | ||
| % Notes due 2036 | % Notes due 2036 | ||
A brief description of the QUIPS can be found under “Prospectus Summary—The Offering” in this prospectus.
The Trust will sell the QUIPS to the underwriters and the Common Securities to HECO. The Trust will immediately use the proceeds of these sales to purchase Junior Subordinated Deferrable Interest Debentures, Series 2004 (the “QUIDSsm”)* from HECO and its subsidiaries, Maui Electric Company, Limited (“MECO”) (collectively, the “Companies”) are offering $100,000,000, $50,000,000 and Hawaii Electric Light Company, Inc. (“HELCO”$15,000,000 aggregate principal amount, respectively, of their respective Notes due 2036 (referred to as the “HECO Notes”, the “HELCO Notes” and the “MECO Notes”, respectively, and, collectively, as the “Notes”). pursuant to this prospectus.
its other unsecured and unsubordinated debt outstanding from time to time.
HELCO’s principal executive offices is 1200 Kilauea Avenue, Hilo, Hawaii 96720 and its telephone number is (808) 935-1171. The address of MECO’s principal executive offices is 210 West Kamehameha Avenue, Kahului, Hawaii 96732 and its telephone number is (808) 871-8461.
| Per QUIPS | Total | |||||
Initial public offering price(1) | $ | $ | ||||
Underwriting commissions | (2) | (2) | ||||
Proceeds to the Trust | $ | $ | ||||
| Proceeds, Before | ||||||||||||
| Initial Public | Underwriting | Expenses, to | ||||||||||
| Offering Price | Discounts | Each Company | ||||||||||
| Per HECO Note | % | % | % | |||||||||
| Total | $ | $ | $ | |||||||||
| Per HELCO Note | % | % | % | |||||||||
| Total | $ | $ | $ | |||||||||
| Per MECO Note | % | % | % | |||||||||
| Total | $ | $ | $ | |||||||||
*QUIPS and QUIDS are servicemarks of 2006.
| A.G. Edwards |
| Lehman Brothers |
| Merrill Lynch & Co. |
March , 2004.2006.
The addressFixed Charges
HECO Capital Trust III
HECO Capital Trust III (which we referearnings to fixed charges was as “HECO Capital Trust III” or the “Trust’) is a statutory trust recently formed under Delaware law by five trustees and HECO. HECO Capital Trust III has been formed solelyfollows for the periods indicated:
| Nine Months | ||||||||||||||||||||||||||||
| Ended | ||||||||||||||||||||||||||||
| Years Ended December 31, | September 30, | |||||||||||||||||||||||||||
| 2000 | 2001 | 2002 | 2003 | 2004 | 2004 | 2005 | ||||||||||||||||||||||
| Ratio of Earnings to Fixed Charges | 3.39 | 3.51 | 3.71 | 3.36 | 3.49 | 3.79 | 3.24 | |||||||||||||||||||||
Because HECO Capital Trust III is being established only for the purposes listed above, the QUIDS, the expense agreement (under which the Companies agree to provide funds to the Trust to pay amounts the Trust owes to persons other than holders of QUIPS) (the “Expense Agreement”) and the related HECO guarantees will be HECO Capital Trust III’s sole assets. Payments on the QUIDS will be HECO Capital Trust III’s sole source of income. HECO Capital Trust III will issue only one series of QUIPS.
| $100,000,000 % HECO | |
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| $ 15,000,000 % MECO Notes due 2036 | ||
| HECO |
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| future secured debt incurred by that Company. | ||
| Stated Maturity | March 1, 2036, or the next succeeding Business Day. | |
| Each of the Companies, | ||
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| date. | ||
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| Sinking Fund | None. | |
Use of Proceeds | ||
| The | |
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| Trustee | Wells Fargo Bank, National Association. | |
| No Listing | The Notes will not be | |
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Our
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The Keahole power plant expansion project, which has been seriously delayed but is currently being constructed, involves HELCO’s plans to install two combustion turbines and, in the future, a heat steam recovery generator, then to convert the units to a dual-train combined cycle unit at its Keahole plant on the island of Hawaii. As of December 31, 2003, HELCO’s costs incurred in its efforts to put the combustion turbines into service and to support existing units (excluding certain costs the PUC has previously permitted to be transferred to plant-in-service for pre-air permit facilities) amounted to approximately $84 million. Substantial additional capital costs, currently estimated to be approximately $15 million, are expected to be incurred to complete installation of the two combustion turbines, including
the costs necessary to satisfy the requirements pertaining to those turbines of a recent settlement agreement. If all conditions to the settlement agreement are satisfied, the two combustion turbines should be installed. The settlement agreement also requires HELCO to pay legal fees and other costs of $3.1 million, which were expensed in November 2003, and to incur additional capital costs relating to noise mitigation, visual mitigation and pollution control on other existing units and on the heat steam recovery generator when it is installed. HELCO also continues not to accrue an allowance for funds used during construction (“AFUDC”) on the project, estimated at $0.6 million after-tax per month. The costs of the heat steam recovery generator, if all necessary permits are obtained and it is installed, will also be higher than originally planned because of the change in schedule in its installation and the need to comply with certain provisions of the settlement agreement. One opponent of the Keahole expansion project, which was not a party to the settlement agreement, continues to appeal judicial and agency rulings and permits necessary to implement the settlement agreement and to complete the project. Management can provide no assurance that these efforts will not delay, hinder or add to the cost of the project.
The East Oahu Transmission Project involves HECO’s plans to expand its current transmission system on the island of Oahu to enhance reliability. HECO’s accumulated costs related to the East Oahu Transmission Project amounted to approximately $20 million as of December 31, 2003, and, if its recently revised plans for the project are approved by the PUC, the capital costs of the two phases of the proposed project, including costs incurred to date, are estimated at $55 million.
After the September 11, 2001 terrorist attacks on the U.S., the wars in Afghanistan and Iraq, the ongoing war on terrorism by the U.S. and the bankruptcies or reported financial difficulties of several major U.S. companies, conditions in the financial markets have been volatile and uncertain, even for financially healthy companies. These events and similar future events could constrain the availability of capital to the Companies, which need capital for their construction programs. If our ability to access capital becomes significantly constrained, our interest costs could increase substantially and, under extreme circumstances, we could be forced to defer our interest payments on the QUIDS or default on our debt obligations, including the QUIDS and the Subsidiary Guarantees (which would result in the Trust lacking funds for making payments on the QUIPS).
For 2003,
Depending on the investment experience of the pension plan assets in the futureobligations and the status of interest rates, the Companies, like many sponsors of defined benefit pension plans, could be required in future years to recognize an additional minimum liability as prescribed by Statement of Financial Accounting Standards (“SFAS”)(SFAS) No. 87, “Employers’ Accounting for Pensions.”Pensions”. The recognition of an additional minimum liability is required if the accumulated benefit obligation exceeds the fair value of plan assets on the measurement date.
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The recognition of additionalrecording a minimum pension liability, is triggeredbut no assurance can be given concerning how or when a plan’s accumulated benefit obligation (“ABO”) exceeds the fair valuePUC will act on this request.
A lower reserve margin also means that our generating units are being more heavily utilized, which in turn could contribute to the current and expected trend of increasing O&M costs for the Companies.
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In connection with its closing in October 2003 of a competition docket that it had initiated in 1996, the
| • | Our overhead and underground transmission and distribution systems (with the exception of substation buildings and contents) have an estimated replacement cost of approximately $3 billion and are not insured against loss or damage because the amount of transmission and distribution system insurance available is limited and the premiums are cost prohibitive. | |
| • | We have no business interruption insurance as the premiums for such insurance would be cost prohibitive, particularly since our systems are not interconnected to other systems. |
resulted generally in a decreased availability of insurance and higher deductibles, higher premiums and more restrictive policy terms.
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that investigation.
favor on September 17, 2003, one of the plaintiffs has appealed from this dismissal. On July 16, 2004, the judgment and HECO’s answering brief inHawaii Supreme Court retained jurisdiction over the appeal (rather than assign the appeal to the Intermediate Court of Appeals) and the matter has been fully briefed and is due March 19, 2004.
awaiting decision.
litigation, variable interest entities and electric utility revenues.
In May 2003, the Financial Accounting Standards Board (“FASB”) ratified EITF Issue No. 01-8, “Determining Whether an Arrangement Contains a Lease” (“EITF No. 01-8”). Under EITF No. 01-8, the Companiesliabilities (amounting to $213.2 million as of September 30, 2005) may be required to recognize service contracts, such as energy contracts for capacity or other arrangements, as leases subject to the requirements of SFAS No. 13, “Accounting for Leases.” If a power purchase agreement is entered into after 2003, or if an existing power purchase agreement is requiredneed to be reassessed after June 2003, such as in the event of a material amendmentrefunded to the agreement, and the agreement falls within the scope of EITF Issue No. 01-8 and results in the classification of the agreement as a capital lease, a material effect on the consolidated balance sheet of HECO may result, including the recognition of significant capital assets and lease obligations.
In December 2003, FASB issued revised FIN No. 46 (“FIN No. 46R”), “Consolidation of Variable Interest Entities” (“VIEs”), which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. HECO is evaluating the impact of applying FIN 46R in the first quarter of 2004 to the trusts that have issued preferred securities (i.e., existing VIEs in which it has variable interests) and has not yet completed this analysis. At this time, it is anticipated that HECO will deconsolidate the trusts that have issued trust preferred securities, since HECO may not be the primary beneficiary of such trusts, and such a deconsolidation would have the effects described under “Accounting Treatment.” Further, HECO is evaluating the impact of applying FIN No. 46R to its relationships with independent power producers (“IPPs”) from whom the Companies purchase power and has not yet completed this analysis. A possible outcome of this analysis, however, is that HECO (or its subsidiaries, as applicable) may be found to meet the definition of a primary beneficiary of the IPPs, which finding may result in the consolidation of the IPPs in HECO’s financial statements. Any such consolidation would have a material effect on HECO’s financial statements, including the recognition of a significant amount of assets and liabilities, and could have a material effect on the ratings of HECO’s securities.
ratepayers.
Our
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As a result of load growth on Oahu and other factors, there currently is an increased risk to generation reliability. Generation reserve margins are lower than considered desirable in light of our circumstances. Existing units are running harder, resulting in more frequent and more extensive maintenance, at times, requiring temporary shut downs of these units. We have taken a number of steps to mitigate the risk of outages, including securing additional purchased power, adding distributed generation at some of our substations and encouraging energy conservation. The marginal costs of supplying growing demand, however, is increasing because of our decreasing reserve margin situation and the rate of this increase is not likely to lessen until after we add our proposed new generating unit on Oahu in 2009.
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ultimate outcome of this process.
Because the Trust will rely on the payments it receives on the QUIDS to fund all payments on the QUIPS, and because the Trust may distribute Distributable HECO QUIDS in exchange for the QUIPS, you are making an investment decision with regard to the Distributable HECO QUIDS as well as the QUIPS. You should carefully review the information in this prospectus about both of these securities.
Notes
unsecured.
HECO receives interest and dividends from MECO and HELCO. Accordingly,that would have ranked equally with the HECO QUIDSNotes and the HECO guarantees, the HELCO Notes and the MECO Notes, respectively, was approximately $448 million, $121 million and $144 million.
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The Companies may incur substantial Senior Indebtedness to fund their capital and other expenditures and holders of the QUIPS are subject to the risks associated with such debt.
The Companies anticipate that they will continue to make substantial capital expenditures in the future. They also may make acquisitions, some of which may be significant,market and the funding for which may be generated, in whole or in part, from the incurrenceability of indebtedness.holders to easily sell their Notes. The incurrence of indebtedness to fund capital expenditures or acquisitions, which in each case could be senior to the QUIPS and the QUIDS, could result in a downgrading of HECO’s credit rating and have an adverse effect upon the market value of the QUIPS and the QUIDS.
If the Companies do not make payments on the QUIDS, the TrustNotes will not be able to pay Distributions and other paymentslisted on the QUIPS and the Trust Guarantee will not apply.
The Trust’s ability to make timely Distribution and redemption payments on the QUIPS is completely dependent upon each Company making timely payments on its QUIDS. If any Company defaults on its QUIDS (or HECO defaults on its obligations under the Subsidiary Guarantees), the Trust will lack funds for making payments on the QUIPS. If this happens, holders of QUIPS will not be able to rely on the Trust Guarantee for payment of such amounts because the Trust Guarantee only guarantees that HECO will make Distribution and redemption payments on the QUIPS if the Trust has the funds to do so itself but does not. Instead, you or the Property Trustee (as defined in this prospectus) will have to bring a legal action against the Companies to enforce the Property Trustee’s rights under the Indentures relating to the QUIDS, including under the Subsidiary Guarantees.
Distribution payments on the QUIPS could be deferred for substantial periods, but holders would continue to recognize income for tax purposes.
As long as no event of default is continuing with respect to its QUIDS, each of the Companies has the right under the Indenture for its QUIDS to begin an Extension Period, during which it will defer interest payments on its QUIDS and the Trust will defer payments of Distributions on the QUIPS in a corresponding amount. Each Extension Period may last for up to 20 consecutive quarters (but not beyond the Stated Maturity) for those QUIDS. There is no particular limit on the number of Extension Periods that a Company may begin if no event of default is continuing with respect to its QUIDS. Unless all three of the Companies defer the payment of interest on their QUIDS for the same Extension Period, holders will receive partial Distributions in the amounts not deferred. See “Description of QUIPS—Distributions” and “Description of QUIDS—Option to Extend Interest Payment Period.”
If an Extension Period occurs, each holder of QUIPS (even if it uses the cash method of accounting) will be required to accrue income (in the form of original issue discount (“OID”) for United States federal income tax purposes) in respect of its proportionate share of the deferred interest on the QUIDS of the deferring Company. As a result, you would be required to include such income in gross income for United States federal income tax purposes before you actually receive any cash attributable to that income.securities exchange. In addition, you would not receive the cash related to such income from the Trust if you sold the QUIPS prior to the record date for any Distribution Date (as defined in this prospectus) on which such deferred Distribution is paid, even if you held the QUIPS on the date that the payments were normally made. However, accrued OID would be added to your adjusted tax basis in your QUIPS but may not be reflected in the amount you realized on the sale. To the extent the amount realized was less than your adjusted tax basis, you would recognize a capital loss for United States federal income tax purposes. The deductibility of capital losses is subject to limitations. See “Certain United States Federal Income Tax Consequences—Stated Interest and Original Issue Discount” and “—Sales or Redemption of QUIPS.”
The QUIPS may be redeemed prior to maturity, including if certain Special Events occur.
The QUIDS may be redeemed in whole or in part on one or more occasions on or after March , 2009. In addition, upon the occurrence and continuation of either a Tax Event or an Investment Company Event, the Companies, at the direction of HECO, have the right to redeem the QUIDS in whole (but not in part) within 90 days following the occurrence of such event. If the QUIDS are redeemed, the QUIPS must be redeemed. Thus, it is possible that the QUIPS could also be redeemed before March , 2009. “Tax Event” refers to certain changes in the current tax treatment of the interest on the QUIDS or the QUIPS trust structure and “Investment Company Event” refers to changes in regulation of investment companies from which the QUIPS trust structure is currently exempt. Each of these terms is described below under “Description of QUIPS” and some of the
possible tax consequences to you are described below under “Certain United States Federal Income Tax Consequences.”
The redemption price for the QUIDS would be 100% of the principal amount being redeemed plus accrued and unpaid interest thereon to the redemption date. Under current United States federal income tax law, a redemption of the QUIPS would constitute a taxable event to the holders. In addition, based on interest rates and market conditions at the time of redemption, holders may not be able to reinvest the money that they receive in a redemption at a rate that is equal to or higher than the rate of return on the QUIPS.
HECO could cause the Trust to distribute the Distributable HECO QUIDS to the holders of the QUIPS at any time, with adverse tax consequences.
HECO has the right, at any time, in its sole discretion, upon 30 days’ prior written notice to the holders of the QUIPS, but subject to obtaining prior approval from the PUC, to direct the Property Trustee to dissolve the Trust. If such action is taken, HECO would issue the Substituted HECO QUIDS to the Trust in exchange for the MECO QUIDS and the HELCO QUIDS and then cause HECO QUIDS and the Substituted HECO QUIDS (which we refer to together in this prospectus as the “Distributable HECO QUIDS”) to be distributed to the holders of QUIPS in liquidation of their interests in the Trust. For purposes of current United States federal income tax law, and assuming (as expected) that the Trust will not be classified as an association taxable as a corporation, the distribution of the Distributable HECO QUIDS upon the dissolution of the Trust would not be a taxable exchange to holders of the QUIPS. However, the exchange of the MECO QUIDS and the HELCO QUIDS for the Substituted HECO QUIDS would likely be treated as a taxable exchange to holders of the QUIPS if the exchange were deemed to constitute a change of “obligor” within the meaning of United States federal income tax law with respect to the QUIDS so exchanged. As a result of this taxable exchange, you would recognize gain or loss as described under “Certain United States Federal Income Tax Consequences—Distribution of QUIDS to Holders of QUIPS.” In addition, the distribution of the Distributable HECO QUIDS could be taxable to holders of QUIPS if the Trust were characterized for United States federal income tax purposes as an association taxable as a corporation at the time of dissolution, if a Tax Event occurred and the Trust became taxable on income received or accrued on the QUIDS, or upon the occurrence of certain other circumstances. See “Certain United States Federal Income Tax Consequences—Distribution of QUIDS to Holders of QUIPS.”
HECO may shorten or extend the Stated Maturity of the QUIDS.
If certain conditions are met, HECO will have the right to either shorten or extend the Stated Maturity of all the QUIDS—and therefore change the mandatory redemption date for the QUIPS—to as early as March , 2009, or as late as March , 2053. Consequently, the QUIPS may be repaid after you have held them only five years or you may have to wait nineteen years beyond the initial Stated Maturity before you are entitled to have your QUIPS repaid.
General market conditions, deferral and extension rights and the tax treatment of the QUIPS could adversely affect market prices for the QUIPS.
Therethere can be no assurance about the market prices for QUIPS or for the Distributable HECO QUIDS that may be distributed in exchange for QUIPS if a dissolution of the Trust occurs.Notes. Accordingly, the QUIPSNotes that an investor purchases, whether in this offering or in the secondary market, or the Distributable HECO QUIDS that a holder of QUIPS receives on dissolution of the Trust, may trade at a discount to the price that the investor paid for the QUIPS. In addition, upon the exchange of the Substituted HECO QUIDS for the MECO QUIDS and the HELCO QUIDS, the Substituted HECO QUIDS may be treated as having been issued either with OID or at a premium, depending on their fair market value at the time of the exchange and a holder’s tax basis in the QUIPS at the time of the exchange. Accordingly, you would be required for United States federal income tax purposes to include
OID in income on an economic accrual basis with respect to such Substituted HECO QUIDS if the Substituted HECO QUIDS are treated as having been issued with OID (even it you use the cash method of accounting).10
Because of the rights of the Companies to defer interest payments on the QUIDS and to shorten or extend the Stated Maturity on the QUIDS, the market price of the QUIPS may be more volatile than the market prices of similar securities that are not subject to these rights. Moreover, any exercise of these rights could cause the market price of the QUIPS to decline. Accordingly, the QUIPS that an investor purchases whether in this offering or in the secondary market, or the Distributable HECO QUIDS that a holder of QUIPS receives on dissolution of the Trust, may trade at a discount to the price that the investor paid for the QUIPS. Furthermore, a holder that disposes of any QUIPS or QUIDS during an Extension Period, when trading prices are likely to be adversely affected by the deferral, might not receive the same return on its investment as a holder that holds its QUIPS until the Extension Period ends.
The market price of the QUIPS may not fully reflect accrued interest.
The QUIPS may trade at prices that do not fully reflect the value of accrued but unpaid interest with respect to the underlying QUIDS. A holder of QUIPS that disposes of its QUIPS between record dates for any Distribution Dates will nevertheless be required to include in income as ordinary income an amount equal to the accrued but unpaid interest on the QUIDS through the date of disposition. Such holder will recognize a capital loss to the extent the selling price (which may not fully reflect the value of accrued but unpaid interest) is less than its adjusted tax basis. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. See “Certain United States Federal Income Tax Consequences—Sales or Redemption of QUIPS.”
Holders of QUIPS will have limited voting rights.
In general, holders of QUIPS will have limited voting rights relating only to the modification of the Trust Agreement (which establishes the terms and conditions of the QUIPS), the exercise of the Trust’s rights as the holder of the QUIDS, and the dissolution, winding-up or liquidation of the Trust other than pursuant to the terms of the Trust Agreement. Holders of QUIPS will not be entitled to vote to appoint, remove or replace the Property Trustee or the Delaware Trustee, which voting rights are vested exclusively in HECO as the holder of the Common Securities, except upon the occurrence of certain events. The Administrative Trustees, who initially are officers of HECO, and HECO may amend the Trust Agreement without the consent of holders of QUIPS to ensure that (i) the Trust will be classified for United States federal income tax purposes as a grantor trust, (ii) the QUIDS will be treated as indebtedness of the Companies and (iii) the Trust will not be required to register as an “investment company” under the Investment Company Act of 1940, even if such action adversely affects the interests of such holders. See “Description of QUIPS—Removal of Trustees” and “—Voting Rights; Amendment of the Trust Agreement.”
There has been no prior market for the QUIPS.
The QUIPS constitute a new issue of securities with no established trading market. Although the QUIPS have been approved for listing on the New York Stock Exchange, subject to official notice of issuance, and HECO expects trading of the QUIPS to begin within 30 days after they are first issued, a listing does not guarantee that a trading market for the QUIPS will develop or, if a trading market for the QUIPS does develop, the depth of that market and the ability of holders to easily sell their QUIPS. Although we have agreed to use our best efforts to list the Distributable HECO QUIDS on the New York Stock Exchange or any other exchange on which the QUIPS are then listed, we cannot assure you that the New York Stock Exchange will approve the Distributable HECO QUIDS for listing or that a trading market will exist for the Distributable HECO QUIDS.
HECO MECO HELCO ended:HECO CAPITAL TRUST IIIHECO Capital Trust III is a statutory trust created under the Delaware Statutory Trust Act, as amended (the “Trust Act”), pursuant to the trust agreement executed by HECO, as Depositor, The Bank of New York, as property trustee (the “Property Trustee”), The Bank of New York (Delaware), as the Delaware trustee, and the three Administrative Trustees named therein (collectively, the “Trustees”), and by the filing of a certificate of trust with the Delaware Secretary of State on November 20, 2003. The Administrative Trustees are individuals who are officers of HECO. The trust agreement will be amended and restated in its entirety (as so amended and restated, the “Trust Agreement”) substantially in the form filed as an exhibit to the registration statement of which this prospectus is a part filed by the Companies and the Trust with the SEC. The Trust’s business and affairs are conducted by the Trustees. The Bank of New York, as Property Trustee, will act as sole trustee under the Trust Agreement for purposes of compliance with the Trust Indenture Act of 1939. The Bank of New York will also act as trustee for purposes of the Trust Guarantee (the “Trust Guarantee Trustee”) and the Indentures (the “Debenture Trustee”). See “Description of QUIDS,” “Description of Trust Guarantee” and “Description of Subsidiary Guarantees and Expense Agreement.” HECO, as the holder of the Common Securities, or the holders of a majority in liquidation preference of the QUIPS if any Debenture Event of Default has occurred and is continuing, will be entitled to appoint, remove or replace the Property Trustee or the Delaware Trustee. In no event will the holders of the QUIPS have the right to vote to appoint, remove or replace the Administrative Trustees; such voting rights are vested exclusively in HECO, as the holder of the Common Securities. The duties and obligations of each Trustee are governed by the Trust Agreement. The Companies will pay all fees and expenses related to the Trust and the offering of the QUIPS and will pay, directly or indirectly, all ongoing costs, expenses and liabilities of the Trust. The principal office of the Trust is c/o The Bank of New York, 101 Barclay Street, 8W, New York, New York 10286, Attention: Corporate Trust Administration. Inquiries concerning the Trust may also be directed to HECO, P.O. Box 2750, Honolulu, Hawaii 96840, Attention: Treasurer.The Trust exists for the exclusive purposes and functions of (i) issuing and selling the QUIPS and the Common Securities, (ii) using the proceeds from the sale of the QUIPS and the Common Securities to acquire QUIDS issued by the Companies, (iii) making Distributions and other payments on the QUIPS and the Common Securities, (iv) maintaining the status of the Trust as a grantor trust for United States federal income tax purposes and (v) engaging in only those other activities necessary, convenient or incidental thereto. Accordingly, the QUIDS and the Subsidiary Guarantees, together with the Expense Agreement, will be the sole assets of the Trust, and payments under the QUIDS and the Subsidiary Guarantees will be the sole revenues of the Trust out of which the Distributions may be made. We have agreed in the Expense Agreement to provide funds to the Trust to pay any amounts the Trust owes to persons other than holders of the QUIPS.All of the Common Securities will be owned by HECO. The Common Securities will rank equally, and payments will be made thereon pro rata with the QUIPS, except that upon the occurrence and continuance of an Event of Default under the Trust Agreement resulting from a Debenture Event of Default, the rights of HECO as holder of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption or otherwise will be subordinated to the rights of the holders of the QUIPS. See “Description of QUIPS—Subordination of Common Securities.” HECO will acquire 61,856 Common Securities with an aggregate liquidation preference of $1,546,400, which will represent 3% of the total capital of the Trust. The Common Securities will have a liquidation preference of $25 per Common Security and distributions on the Common Securities will be made at the same rate as distributions are made on the QUIPS. The Trust has a term of approximately 52 years, but may dissolve earlier as provided in the Trust Agreement.HECO currently expects to treat the Trust in accordance with Rule 3-10(b) of SEC Regulation S-X and thus not to provide separate financial statements for the Trust. Instead, HECO will include an appropriate footnote pertaining to the QUIPS and the Trust in its financial statements. See “Accounting Treatment.” (“HEI”), a Hawaii corporation, as a result of a corporate reorganization completed on July 1, 1983. HECO’s principal business and executive offices are located at 900 Richards Street, Honolulu, Hawaii 96813 and its telephone number is (808) 543-7771.was incorporated under the laws of the Republic of Hawaii on December 5, 1894, and its principal business and executive offices are located at 1200 Kilauea Avenue, Hilo, Hawaii 96720, and its telephone number is (808) 969-1171.HECO, MECO and HELCO are regulated operating electric public utilities engaged in the production, purchase, transmission, distribution and sale of electricity on the islands of Oahu; Hawaii; and Maui, Lanai and Molokai; and Hawaii,Molokai, respectively. These five islands had a combined population on December 31, 20032004 estimated at 1,197,000,1,202,000, or approximately 95 percent of the State’sState of Hawaii’s total population, and a service area of approximately 5,766 square miles. The principal communities served include Honolulu (on Oahu), Hilo and Kona (on Hawaii) and Wailuku and Kahului (on Maui) and Hilo and Kona (on Hawaii). The service areas also include numerous suburban communities, resorts, U.S. Armed Forces installations and agricultural operations.2001, 2002, 2003 and 20032004 and the related electric sales revenues by Company for each of the years then ended (dollars in thousands) : 2001 2002 2003 Customer
accounts Electric sales
revenues Customer
accounts Electric sales
revenues Customer
accounts Electric sales
revenues 280,911 $ 882,308 283,161 $ 865,608 286,677 $ 960,717 58,840 203,847 59,983 191,029 61,423 213,806 65,241 193,209 66,411 191,589 68,893 213,268 404,992 $ 1,279,364 409,555 $ 1,248,226 416,993 $ 1,387,791
| 2002 | 2003 | 2004 | ||||||||||||||||||||||
| Customer | Electric Sales | Customer | Electric Sales | Customer | Electric Sales | |||||||||||||||||||
| Accounts | Revenues | Accounts | Revenues | Accounts | Revenues | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| HECO | 283,161 | $ | 865,608 | 286,677 | $ | 960,717 | 288,456 | $ | 1,050,388 | |||||||||||||||
| HELCO | 66,411 | 191,589 | 68,893 | 213,268 | 71,594 | 240,947 | ||||||||||||||||||
| MECO | 59,983 | 191,029 | 61,423 | 213,806 | 61,996 | 250,750 | ||||||||||||||||||
| 409,555 | $ | 1,248,226 | 416,993 | $ | 1,387,791 | 422,046 | $ | 1,542,085 | ||||||||||||||||
| HECO | HELCO | MECO | Total | |||||||||||||
| Residential | 32 | % | 41 | % | 37 | % | 34 | % | ||||||||
| Commercial | 32 | 41 | 34 | 34 | ||||||||||||
| Large light and power | 35 | 18 | 29 | 31 | ||||||||||||
| Other | 1 | — | — | 1 | ||||||||||||
| 100 | % | 100 | % | 100 | % | 100 | % | |||||||||
| HECO | MECO | HELCO | Total | |||||||||
Residential | 32 | % | 36 | % | 41 | % | 34 | % | ||||
Commercial | 32 | 35 | 41 | 34 | ||||||||
Large light and power | 35 | 29 | 18 | 31 | ||||||||
Other | 1 | — | — | 1 | ||||||||
| 100 | % | 100 | % | 100 | % | 100 | % | |||||
| Nine Months Ended | |||||||||||||||||||||
| Years Ended December 31, | September 30, | ||||||||||||||||||||
| 2002 | 2003 | 2004 | 2004 | 2005 | |||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
Income Statement Data: | |||||||||||||||||||||
| Operating Revenues | $ | 1,252,929 | $ | 1,393,038 | $ | 1,546,875 | $ | 1,124,103 | $ | 1,292,374 | |||||||||||
| Operating Expenses: | |||||||||||||||||||||
| Fuel Oil | 310,595 | 388,560 | 483,423 | 340,166 | 447,064 | ||||||||||||||||
| Purchased Power | 326,455 | 368,076 | 398,836 | 292,491 | 329,671 | ||||||||||||||||
| Other Operating Expenses | 480,722 | 511,564 | 543,324 | 394,620 | 430,336 | ||||||||||||||||
| Total Operating Expenses | 1,117,772 | 1,268,200 | 1,425,583 | 1,027,277 | 1,207,071 | ||||||||||||||||
| Operating Income | $ | 135,157 | $ | 124,838 | $ | 121,292 | $ | 96,826 | $ | 85,303 | |||||||||||
| Allowance for Equity Funds Used During Construction | $ | 3,954 | $ | 4,267 | $ | 5,794 | $ | 5,056 | $ | 3,675 | |||||||||||
| Income Before Interest and Other Charges(1) | $ | 142,252 | $ | 131,008 | $ | 130,218 | $ | 104,768 | $ | 91,789 | |||||||||||
| Allowance for Borrowed Funds Used During Construction | $ | 1,855 | $ | 1,914 | $ | 2,542 | $ | 2,236 | $ | 1,460 | |||||||||||
| Income Before Preferred Stock Dividends of HECO(2) | $ | 91,285 | $ | 79,991 | $ | 82,257 | $ | 68,743 | $ | 55,426 | |||||||||||
| Net Income for Common Stock | $ | 90,205 | $ | 78,911 | $ | 81,177 | $ | 67,933 | $ | 54,616 | |||||||||||
Operating Data: | |||||||||||||||||||||
| Average Fuel Oil Cost Per Barrel | $ | 29.10 | $ | 36.23 | $ | 42.67 | $ | 40.38 | $ | 52.85 | |||||||||||
| Kilowatthour Sales (Millions) | 9,544 | 9,775 | 10,063 | 7,516 | 7,538 | ||||||||||||||||
12
| Years Ended December 31, | ||||||||||
| 2001 | 2002 | 2003 | ||||||||
Income Statement Data: | ||||||||||
(dollars in thousands) | ||||||||||
Operating Revenues | $ | 1,284,312 | $ | 1,252,929 | $ | 1,393,038 | ||||
Operating Expenses | ||||||||||
Fuel Oil | 346,728 | 310,595 | 388,560 | |||||||
Purchased Power | 337,844 | 326,455 | 368,076 | |||||||
Other Operating Expenses | 464,408 | 480,722 | 511,564 | |||||||
Total Operating Expenses | 1,148,980 | 1,117,772 | 1,268,200 | |||||||
Operating Income | $ | 135,332 | $ | 135,157 | $ | 124,838 | ||||
Allowance for Equity Funds Used During Construction | $ | 4,239 | $ | 3,954 | $ | 4,267 | ||||
Income Before Interest and Other Charges (1) | $ | 142,768 | $ | 142,252 | $ | 131,008 | ||||
Allowance for Borrowed Funds Used During Construction | $ | 2,258 | $ | 1,855 | $ | 1,914 | ||||
Income Before Preferred Stock Dividends of HECO (2) | $ | 89,380 | $ | 91,285 | $ | 79,991 | ||||
Net Income for Common Stock | $ | 88,300 | $ | 90,205 | $ | 78,911 | ||||
Operating Data: | ||||||||||
Average Fuel Oil Cost Per Barrel | $ | 33.49 | $ | 29.10 | $ | 36.23 | ||||
Kilowatthour Sales (Millions) | 9,370 | 9,544 | 9,775 | |||||||
As of December 31, 2003 | ||||||||||
Capitalization Data: | ||||||||||
(dollars in thousands) | ||||||||||
Short-Term Borrowings | $ | 6,000 | — | % | ||||||
Long-Term Debt, Net | 699,420 | 39 | ||||||||
HECO-Obligated Mandatorily Redeemable Trust Preferred Securities of Subsidiary Trusts (3) | 100,000 | 6 | ||||||||
Preferred Stock Without Mandatory Redemption Requirements | 34,293 | 2 | ||||||||
Common Stock Equity | 944,443 | 53 | ||||||||
Total Capitalization | $ | 1,784,156 | 100 | % | ||||||
| As of September 30, 2005 | |||||||||||||||||
| Actual | As Adjusted (3) | ||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
Capitalization Data: | |||||||||||||||||
| Short-Term Borrowings(4) | $ | 125,001 | 6 | % | $ | — | — | % | |||||||||
| Long-Term Debt, Net(5) | 765,009 | 39 | 930,009 | 46 | |||||||||||||
| Preferred Stock Without Mandatory Redemption Requirements | 34,293 | 2 | 34,293 | 2 | |||||||||||||
| Common Stock Equity | 1,038,013 | 53 | 1,038,013 | 52 | |||||||||||||
| Total Capitalization | $ | 1,962,316 | 100 | % | $ | 2,002,315 | 100 | % | |||||||||
| (1) | Income Before Interest and Other Charges includes Operating Income plus the Allowance for Equity Funds Used During Construction and nonoperating income. |
| (2) | Income Before Preferred Stock Dividends of HECO includes Income Before Interest and Other Charges, less interest (reduced by Allowance for Borrowed Funds Used During Construction), amortization of net bond premium and expense, preferred stock dividends of HELCO and MECO and, prior to January 1, 2004, distributions on the preferred securities of |
| (3) | |
| (4) | Inter-company borrowings have been eliminated in |
| (5) | Comprised of |
13
| HECO Consolidated | HELCO | MECO | ||||||||||||||||||||||
| December 31, | September 30, | December 31, | September 30, | December 31, | September 30, | |||||||||||||||||||
| 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||
| Current Assets | $ | 384,544 | $ | 430,083 | $ | 58,978 | $ | 63,816 | $ | 65,976 | $ | 77,660 | ||||||||||||
| Noncurrent Assets | 2,495,071 | 2,568,662 | 500,985 | 517,705 | 427,873 | 433,255 | ||||||||||||||||||
| $ | 2,879,615 | $ | 2,998,745 | $ | 559,963 | $ | 581,521 | $ | 493,849 | $ | 510,915 | |||||||||||||
| Common Stock Equity | $ | 1,017,104 | $ | 1,038,013 | $ | 186,505 | $ | 190,694 | $ | 189,413 | $ | 194,445 | ||||||||||||
| Preferred Stock Without Mandatory Redemption Requirements | 34,293 | 34,293 | 7,000 | 7,000 | 5,000 | 5,000 | ||||||||||||||||||
| Current Liabilities | 334,227 | 377,887 | 77,186 | 87,047 | 39,524 | 44,549 | ||||||||||||||||||
| Noncurrent Liabilities | 1,493,991 | 1,548,552 | 289,272 | 296,780 | 259,912 | 266,921 | ||||||||||||||||||
| $ | 2,879,615 | $ | 2,998,745 | $ | 559,963 | $ | 581,521 | $ | 493,849 | $ | 510,915 | |||||||||||||
| HECO Consolidated | HELCO | MECO | ||||||||||||||||||||||
| Nine Months Ended | Nine Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | September 30, | ||||||||||||||||||||||
| 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||
| Operating Revenues | $ | 1,124,103 | $ | 1,292,374 | $ | 175,186 | $ | 211,860 | $ | 184,206 | $ | 216,391 | ||||||||||||
| Operating Income | $ | 96,826 | $ | 85,303 | $ | 16,486 | $ | 17,364 | $ | 23,203 | $ | 20,924 | ||||||||||||
| Net Income for Common Stock | $ | 67,933 | $ | 54,616 | $ | 10,068 | $ | 10,726 | $ | 15,770 | $ | 14,578 | ||||||||||||
| HECO Consolidated | MECO | HELCO | ||||||||||||||||
| December 31, 2002 | December 31, 2003 | December 31, 2002 | December 31, 2003 | December 31, 2002 | December 31, 2003 | |||||||||||||
Balance Sheet Data: | ||||||||||||||||||
(in thousands) | ||||||||||||||||||
Current Assets | $ | 281,859 | $ | 306,470 | $ | 64,723 | $ | 69,683 | $ | 40,246 | $ | 45,215 | ||||||
Noncurrent Assets | 2,211,577 | 2,274,786 | 395,810 | 406,862 | 445,291 | 455,630 | ||||||||||||
| $ | 2,493,436 | $ | 2,581,256 | $ | 460,533 | $ | 476,545 | $ | 485,537 | $ | 500,845 | |||||||
Common Stock Equity | $ | 923,256 | $ | 944,443 | $ | 181,373 | $ | 187,195 | $ | 171,404 | $ | 174,639 | ||||||
Preferred Stock Without Mandatory Redemption Requirements | 34,293 | 34,293 | 5,000 | 5,000 | 7,000 | 7,000 | ||||||||||||
HECO-Obligated Mandatorily Redeemable Trust Preferred Securities of Subsidiary Trusts | 100,000 | 100,000 | — | — | — | — | ||||||||||||
Current Liabilities | 184,277 | 216,998 | 30,879 | 38,979 | 45,537 | 47,075 | ||||||||||||
Noncurrent Liabilities | 1,251,610 | 1,285,522 | 243,281 | 245,371 | 261,596 | 272,131 | ||||||||||||
| $ | 2,493,436 | $ | 2,581,256 | $ | 460,533 | $ | 476,545 | $ | 485,537 | $ | 500,845 | |||||||
| Years Ended December 31, | Years Ended December 31, | Years Ended December 31, | ||||||||||||||||
| 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | |||||||||||||
Income Statement Data: | ||||||||||||||||||
(in thousands) | ||||||||||||||||||
Operating Revenues | $ | 1,252,929 | $ | 1,393,038 | $ | 192,337 | $ | 215,295 | $ | 192,209 | $ | 214,243 | ||||||
Operating Income | 135,157 | 124,838 | 28,711 | 28,672 | 21,813 | 20,450 | ||||||||||||
Net Income for Common Stock | 90,205 | 78,911 | 18,101 | 18,207 | 12,444 | 11,149 | ||||||||||||
14
No separate financial statements of MECO or HELCO have been included in this prospectus in accordance with the provisions of subsection (c) of Rule 3-10 of SEC Regulation S-X. HECO’s financial statements will include, in accordance with Rule 3-10(c) of Regulation S-X, a footnote providing consolidating financial information, with separate columns for (i) HECO, (ii) HELCO, (iii) MECO, (iv) any other subsidiaries of HECO on a combined basis, (v) consolidating adjustments and (vi) total consolidated amounts, but may omit item (iv) so long as HECO’s subsidiaries other than HELCO and MECO are minor subsidiaries.
For the first nine months of 2005, gross capital expenditures requiring the use of cash totaled approximately $92 million for HECO, $37 million for HELCO and $23 million for MECO. general plant and other. These estimates do not include expenditures, which could be material, that would be required to comply with cooling water intake structure regulations adopted by the EPA in 2004, or the proposed Clear Skies Bill, if adopted by Congress.CapitalGross capital expenditures requiring the use of cash totaled approximately $147.0$212 million in 2003,2004, of which $91.3$133 million was attributable to HECO, $26.3$49 million to MECOHELCO and $29.4$30 million to HELCO.MECO. Approximately 58%48% of the 20032004 gross capital expenditures was for transmission and distribution projects and approximately 42% was for generation andprojects, with the balance for general plant projects.and other. Cash contributions in aid of construction received in 20032004 totaled $13.0$9 million.AFUDCfrom gross capital expenditures the allowance for funds used during construction (“AFUDC”) and capital expenditures funded by third-party contributions in aid of construction, for the five-year period 20042006 through 2008,2010, is currently estimated to total approximately $0.8 billion. Approximately 52%50% of gross capital expenditures forecast for this period, including AFUDC and third-party contributions in aid of construction, is for transmission and distribution projects, with 42% for generation projects and the remaining 48% primarily8% for generation projects.kilowatt hourkilowatthour sales and peak load, the availability of purchased power and changes in expectations concerning the construction and ownership of future generating units, the availability of generating sites and transmission and distribution corridors, the ability to obtain adequate and timely rate increases, escalation in construction costs, the impacts of demand-sidedemand side management programs, and combined heat and power (CHP) installations, the effects of opposition to proposed construction projects and requirements of environmental and other regulatory and permitting authorities.for 2004 through 2008 are currently estimated to total approximately $0.8 billion. HECO’s consolidated internal sources (primarily consolidated cash flows from operating activities (comprisedoperations comprised mainly of net income, adjusted for noncash income and expense items such as depreciation, amortization and deferred taxes)taxes, and changes in working capital), after the payment of common stock and preferred stock dividends, are currently not expected to provide sufficient cash to covermeet consolidated financing requirements and to reduce the forecast consolidated net capital expenditures, except for a slight increase inlevel of short-term borrowings and in long-term debt from the drawdown of outstanding revenue bond proceeds. Short-term borrowing levels areborrowings. Debt financing is expected to fluctuate during the forecast period. Additional debt or equity financing, or both, may be required for various reasons, includingto fund this shortfall and any unanticipated expenditures not included in the 2006 through 2010 forecast, such as increases in the costs of or an acceleration of the construction of capital projects, unbudgeted acquisitions or investments in new businesses and significant increases in contributions to retirement benefit plans.thatof the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Although the Companies were not required to make any contributions to the pension plans to meet minimum funding requirements pursuant to ERISA for 2005, 2004 or 2003, they did make voluntary contributions in those years. With respect to the postretirement benefits plans, the Company’s policy is to comply with directives from the PUC to fund the costs. Additional contributions to the retirement benefit plans may be required, or may be
15
2010.
Notes.
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth HECO’s consolidated ratios of earnings to fixed charges, and to combined fixed charges and preferred stock dividends, for the periods indicated:
| Years Ended December 31, | ||||||||||
| 1999 | 2000 | 2001 | 2002 | 2003 | ||||||
Ratio of Earnings to Fixed Charges | 3.09 | 3.39 | 3.51 | 3.71 | 3.36 | |||||
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends | 3.00 | 3.31 | 3.41 | 3.60 | 3.27 | |||||
In computing the Ratio of Earnings to Fixed Charges, earnings represent Income Before Preferred Stock Dividends of HECO (reduced by Allowance for Borrowed Funds Used During Construction) plus federal and state income taxes and fixed charges. Fixed charges consist of interest on all indebtedness (without reduction for the Allowance for Borrowed Funds Used During Construction) plus amortization of net bond premium and expense, pre-tax preferred stock dividend requirements of MECO and HELCO, the estimated interest component of rentals and the preferred securities distribution requirements of HECO Capital Trust I and HECO Capital Trust II. In computing the Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends, earnings represent Net Income for Common Stock, and pre-tax preferred stock dividend requirements of HECO are added to fixed charges.
| • | Annual Report onForm 10-K for the year ended December 31, 2004. | |
| • | Quarterly Reports onForm 10-Q for the quarters ended March 31, 2005, June 30, 2005 and September 30, 2005. | |
| • | Current Reports onForm 8-K filed January 6, 2005, January 18, 2005, January 25, 2005, February 2, 2005, February 8, 2005, April 26, 2005, May 12, 2005, May 19, 2005, July 26, 2005, September 19, 2005, September 29, 2005, November 1, 2005, November 8, 2005, November 9, 2005, December 14, 2005 and January 20, 2006. | |
| • | Any future filings made by HECO with the SEC under Sections 13(a), 13(c), 14 and 15 of the Securities Exchange Act of 1934 (the “Exchange Act”) if the filings are made prior to the time that all of the Notes are sold in this offering. |
You may request a free copy of these filings by writing or telephoning us at the following address:
16
All of the proceeds from the sale of QUIPS and the Common Securities will be invested by the Trust in the QUIDS. All of the proceeds from the sale to the Trust of the QUIDS, together with any necessary additional funds to be provided by the Companies, will be used by the Companies to redeem the junior subordinated deferrable interest debentures that they issued to HECO Capital Trust I in 1997, which will in turn result in the redemption of the outstanding trust preferred securities and common securities of HECO Capital Trust I and the termination of that trust. Such redemption is expected to be completed within 45 days after completion of the sale of the QUIPS at a redemption price of 100% of the stated liquidation preference thereof plus accumulated and unpaid distributions thereon to the date of redemption. All or a portion of the
interest debentures issued to HECO Capital Trust I (to the extent such investments are permissible by the trustee), until their application to effect such redemption, in commercial paper, repurchase agreements, United States treasury securities, United States federal agency securities, tax-exempt securities, certificatesdeduction of deposit, money market funds, time deposits or Euro dollar deposits, or a combination of such short-term investments. The stated annual interest/distribution rate of the junior subordinated deferrable interest debentures/trust preferred securities to be redeemed is 8.05%.
Historically, HECO has included the financial statements of trusts similar to the Trust (i.e., HECO Capital Trust Iunderwriting discounts and HECO Capital Trust II) in its consolidated financial statements, with the quarterly income preferred securities issued by those trusts being classified in HECO’s consolidated balance sheet under the heading “HECO-obligated mandatorily redeemable trust preferred securities of subsidiary trusts holding solely HECO and HECO-guaranteed debentures.”
In December 2003, the FASB issued revised FIN No. 46 (“FIN 46R”), “Consolidation of Variable Interest Entities,” which addresses how a business enterprise should evaluate whether it has a controlling financial interest in a variable interest entity (a “VIE”) through means other than voting rights and accordingly should consolidate the entity. HECO Capital Trusts I, II and III are VIEs within the meaning of FIN 46R and HECO is evaluating the impact of applying FIN 46R in the first quarter of 2004 to these entities. Although HECO has not yet completed its analysis, at this time itexpenses. It is anticipated that the net proceeds from the sale of the HECO Notes will be used by HECO for capital expenditures and/or to repay short-term borrowings (including borrowings from affiliates) incurred for capital expenditures or to refinance short-term borrowings used for capital expenditures. As of December 31, 2005, the short-term indebtedness of HECO consisted of approximately $136.2 million of commercial paper and $5.3 million of borrowings from MECO. Such commercial paper bears interest at rates ranging from 4.40% to 4.51% and had maturities ranging from 13 days to 20 days. The borrowings from MECO bear interest at rates equal to the average of the effective7-day Treasury Repurchase rate quoted by Merrill Lynch, Pierce, Fenner & Smith Incorporated on each Friday during the month, calculated in arrears after the end of each month and applied to the fluctuating balances during the month (computed on the basis of a365-day year, actual days). The rate for borrowings in the month of December 2005 was 3.94% and the borrowings as of December 31, 2005 had maturities of up to 339 days, subject to HECO’s right to prepay such borrowings, in whole or in part, at any time.
17
The QUIPS will be created pursuantHELCO and MECO, the Indentures contain substantially similar provisions. Unless otherwise stated, the following summaries of the Notes, Indenture Securities and the Indentures apply separately to each Indenture and to the termsNotes and Indenture Securities issued thereunder. References to the “Company” herein are to HECO, HELCO and MECO, as the case may be, as the issuer of Notes under its respective Indenture. Words capitalized and not otherwise defined herein have the Trust Agreement.meanings given to them in the Indentures. The following is a summary of certain ofsummaries herein concerning the terms and provisions ofNotes, the QUIPSGuarantees and the Trust Agreement. This summary isIndentures do not apurport to be complete description of all ofand are qualified in their entirety by express reference to the terms and provisions ofNotes, the QUIPSGuarantees and the Trust Agreement. For more information, we refer you toIndentures. A copy of the form of the Trust Agreement, which has beeneach Indenture is filed as an exhibit to the registration statement of which this prospectus formsis a part.
General
Pursuant Wherever particular provisions of the Indentures or terms defined therein are referred to, such provisions or definitions are incorporated by reference as a part of the statements made herein and such statements are qualified in their entirety by such reference.
18
The QUIPS will represent preferred undivided beneficial interests in the assets of the Trust, and will be entitled to other benefits as described in the Trust Agreement. The QUIDS, HECO’s Subsidiary Guarantees and the Expense Agreement will be the only assets of the Trust. Legal title to the QUIDS will be held by the Property Trustee in trustspecial purpose revenue bonds issued for the benefit of the holdersCompanies. The Notes of each Company will rank junior to any future secured debt incurred by that Company. As of the QUIPS anddate of this prospectus, none of the Common Securities. The Trust GuaranteeCompanies had any secured debt outstanding.
Distributions
Distributions on QUIPS will be payable at the annual rate of % of the stated liquidation preference of $25 per QUIPS, payable quarterly in arrears on March 31, June 30, September 30its authentication and, December 31 of each year. Distributions will accumulate from the original issue date. The first Distribution payment date for the QUIPS will be March 31, 2004. The amount of Distributions payable for any period will be computedunless otherwise provided, shall bear interest, calculated on the basis of a360-day year consisting of twelve30-day months, exceptfrom its Original Issue Date (defined below) or from the most recent Interest Payment Date to which interest has been paid, whichever is later, at the rate per annum stated on the face thereof until the principal amount thereof is paid or made available for payment. Notwithstanding the foregoing, each Note authenticated after the Regular Record Date (as defined below) for any period shorter than a full calendar month,Interest Payment Date but before such Interest Payment Date shall bear interest from such Interest Payment Date, unless the date of first authentication of Notes of the same interest rate and maturity (the “Original Issue Date”) is after such Regular Record Date but before such Interest Payment Date in which case such amountNote shall bear interest from such Original Issue Date. Interest on each Note will be computedpayable semiannually in arrears on each September 1 and March 1, beginning on September 1, 2006, and at Maturity (each, an “Interest Payment Date”).
19
So long as no Debenture Event of Default under its Indenture has occurred and is continuing, each of the Companies has the right under its Indenture to elect to defer the payment of interest on its QUIDS at any time for a period (including extensions) not exceeding 20 consecutive quarters with respect to each Extension Period. However, no Extension Period may extend beyond the Stated Maturity of the QUIDS. If there is a deferral, quarterly Distributions on the QUIPS in a corresponding amount will be deferred by the Trust during the Extension Period. Unless all three of the Companies
defer the payment of interest on their QUIDS for the same Extension Period, holders will receive partial Distributions in the corresponding amounts not deferred. Distributions to which holders of the QUIPS are entitled but do not receive will accumulate additional Distributions thereon at the rate per annum of % thereof, compounded quarterly from the relevant payment date for such Distributions. The term “Distributions” as used herein shall include any such additional Distributions. During any such Extension Period, each of the deferring Companies (and, if such deferring Company is MECO or HELCO, HECO) may not, either directly or indirectly through a subsidiary, (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock, (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities (including other junior subordinated deferrable interest debentures of such Company) that rank equally with or junior in interest to the QUIDS on which payment is being deferred or (iii) make any guarantee payments with respect to any guarantee issued by such Company if such guarantee ranks equally with or junior in interest to the QUIDS on which payment is being deferred (other than (a) dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, its common stock and exchanges or conversions of common stock of one class for common stock of another class, (b) payments by HECO under the Trust Guarantee (or under any other similar guarantee by HECO with respect to any securities of any of its subsidiaries, provided that the proceeds from the issuance of such securities were used to purchase junior subordinated deferrable interest debentures issued by any of the Companies, including HECO Capital Trust III) and the Subsidiary Guarantees, and (c) purchases of its common stock required to prevent the loss or secure the renewal or reinstatement of any government license or franchise held by it). Prior to the termination of any such Extension Period, the deferring Company may further extend the interest payment period, provided that no Extension Period may exceed 20 consecutive quarters or extend beyond the Stated Maturity of the QUIDS. Upon the termination of any such Extension Period and the payment of all amounts then due on any Interest Payment Date, the deferring Company may elect to begin a new Extension Period. See “Description of QUIDS—Option to Extend Interest Payment Period” and “Certain United States Federal Income Tax Consequences—Stated Interest and Original Issue Discount.”
None of the Companies has a current intention of exercising its right to defer payments of interest on its QUIDS. Moreover, because of the consequences of exercising such right, including a prohibition on the payment of dividends with respect to a deferring Company’s capital stock (and with respect to HECO’s capital stock if the deferring Company is MECO or HELCO), each of the Companies believes that the likelihood of such exercise is remote.
The revenues of the Trust available for distribution to holders of the QUIPS will be limited to payments under the QUIDS (in which the Trust will invest the proceeds from the issuance and sale of the QUIPS and the Common Securities) and the Subsidiary Guarantees. See “Description of QUIDS.” To the extent the Companies do not make interest payments on the QUIDS and HECO does not make payments under the Subsidiary Guarantees, the Property Trustee will not have sufficient funds available to pay full Distributions on the QUIPS. The payment of Distributions (if and to the extent the Trust has funds legally available for the payment of such Distributions and cash sufficient to make such payments) is guaranteed by HECO on a subordinated basis as set forth below under “Description of Trust Guarantee.”
Distributions on the QUIPS on each Distribution Date will be payable to the holders thereof as they appear on the register of the Trust on the relevant record date, which, as long as the QUIPS remain in book-entry-only form, will be one Business Day prior to such Distribution Date. Subject to any applicable laws and regulations and the provisions of the Trust Agreement, each such payment will be made as described under “—Book-Entry Issuance.” In the event that the QUIPS are not in book-entry-only form, the relevant record date for such QUIPS shall be the date that is 15 days prior to the
relevant Distribution Date, whether or not a Business Day, and payments shall be made as described below under “—Payment and Paying Agency.”
Redemption or Exchange
Mandatory Redemption. Upon the repayment or redemption, in whole or in part, of any QUIDS, whether at Stated Maturity or upon earlier redemption as provided in any Indenture, the proceeds from such repayment or redemption shall be applied by the Property Trustee to redeem a Like Amount (as defined below) of the QUIPS and the Common Securities, upon not less than 30 nor more than 60 days notice, at the “QUIPS Redemption Price,” which is equal to the aggregate liquidation preference of the QUIPS and Common Securities to be redeemed plus accumulated and unpaid Distributions thereon to the date of redemption (the “Redemption Date”). See “Description of QUIDS—Redemption.”
Each of the Companies will have the right to redeem its QUIDS on or after March , 2009, in whole at any time or in part from time to time, subject to the conditions described under “Description of QUIDS—Redemption,” at the “QUIDS Redemption Price,” which is equal to the accrued and unpaid interest on the QUIDS so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof. In addition, the Companies, at the direction of HECO, will have the right to redeem the QUIDS at any time, in whole (but not in part), upon the occurrence of a Tax Event or an Investment Company Event and subject to the further conditions described below under “Description of QUIDS—Redemption,” at the QUIDS Redemption Price.
Special Event Redemption or Distribution of QUIDS. If a Special Event shall occur and be continuing, the Companies, at the direction of HECO, have the right to redeem the QUIDS in whole (but not in part) at the QUIDS Redemption Price, and thereby cause a mandatory redemption of the QUIPS and the Common Securities in whole (but not in part) at the QUIPS Redemption Price, within 90 days following the occurrence of such event.
In addition, subject to obtaining prior approval from the PUC, HECO may at any time, whether or not a Special Event has occurred, upon 30 days’ prior written notice to the holders of the QUIPS, direct the Property Trustee in writing to dissolve the Trust and, after satisfaction of liabilities to creditors of the Trust as provided by applicable law and the consummation of the exchange of Substituted HECO QUIDS for the MECO QUIDS and the HELCO QUIDS, cause a Like Amount of Distributable HECO QUIDS to be distributed by the Trust to the holders of the QUIPS and the Common Securities in liquidation of the Trust. Under current United States federal income tax law, although the distribution of the Distributable HECO QUIDS upon the dissolution of the Trust would not be a taxable exchange to holders of the QUIPS for United States federal income tax purposes, the exchange of the MECO QUIDS and the HELCO QUIDS for the Substituted HECO QUIDS would likely be treated as such a taxable exchange. As a result of such taxable exchange, each holder would recognize gain or loss as described below under “Certain United States Federal Income Tax Consequences—Distribution of QUIDS to Holders of QUIPS.” In addition, the distribution of the Distributable HECO QUIDS could be a taxable exchange to holders of the QUIPS if the Trust is characterized for United States federal income tax purposes as an association taxable as a corporation at the time of dissolution or it there is a change in law or legal interpretation, or upon the occurrence of certain other circumstances. See “Certain United States Federal Income Tax Consequences—Distribution of QUIDS to Holders of QUIPS.”
If HECO does not elect either to redeem the QUIDS or to dissolve the Trust and distribute the Distributable HECO QUIDS in exchange for the QUIPS as described above, the QUIPS will remain outstanding and, in the event a Tax Event has occurred and is continuing, Additional Sums may be payable by the Companies on the QUIDS.
“Additional Sums” means the additional amounts necessary in order that Distributions then due and payable by the Trust on the outstanding QUIPS and Common Securities of the Trust shall not be reduced as a result of any additional taxes, duties and other governmental charges to which the Trust has become subject.
“Investment Company Event” means the receipt by HECO or the Trust of an opinion of counsel, rendered by a law firm having a recognized federal securities practice, to the effect that, as a result of the occurrence of a change in law or regulation or a change (including a prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a “Change in 1940 Act Law”), there is more than an insubstantial risk that the Trust is or will be considered an “investment company” that is required to be registered under the Investment Company Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the QUIPS.
“Like Amount” means (i) with respect to a redemption of the QUIPS and the Common Securities, QUIPS and Common Securities having an aggregate liquidation preference equal to the aggregate principal amount of QUIDS to be contemporaneously repaid or redeemed in accordance with the Indentures and the proceeds of which will be used to pay the QUIPS Redemption Price of such QUIPS and to redeem such Common Securities, and (ii) with respect to a distribution of Distributable HECO QUIDS to holders of QUIPS and Common Securities in connection with the dissolution and liquidation of the Trust, Distributable HECO QUIDS having an aggregate principal amount equal to the aggregate liquidation preference of the QUIPS and the Common Securities of the holders to whom such QUIDS are distributed. “Liquidation preference” means the stated liquidation preference of $25 per QUIPS or $25 per Common Security.
“Tax Event” means the receipt by HECO or the Trust of an opinion of counsel, rendered by a law firm having a recognized federal and state tax and securities practice, to the effect that, as a result of a Tax Action (as defined below), there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the QUIDS, (ii) interest payable by any of the Companies on its respective QUIDS is not, or within 90 days of the date of such opinion will not be, deductible by such Company, in whole or in part, for United States federal income tax purposes, or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges. A “Tax Action” includes (a) any amendment to or change (including any announced prospective change) in the laws (or any regulations thereunder) of the United States, or of any State or the District of Columbia, or of any political subdivision or taxing authority thereof or therein, (b) any judicial decision interpreting, applying or clarifying such laws or regulations or (c) any administrative pronouncement or action that represents an official position (including a clarification of an official position) of the governmental authority or regulatory body making such administrative pronouncement or taking such action, in each such case that occurs or becomes effective on or after the date of original issuance of the QUIPS.
After the liquidation date fixed for any distribution of Distributable HECO QUIDS for QUIPS, (i) the QUIPS will no longer be deemed to be outstanding, (ii) The Depository Trust Company (“DTC”) or its nominee, as the record holder of the QUIPS, will receive a registered global certificate or certificates representing such QUIDS to be delivered upon such distribution and (iii) any certificates representing the QUIPS not held by DTC or its nominee will be deemed to represent such QUIDS having a principal amount equal to the liquidation preference of such QUIPS, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on the QUIPS, until such certificates are presented to the Administrative Trustees or their agent for transfer or reissuance.
There can be no assurance as to the market prices for the QUIPS or the Distributable HECO QUIDS that may be distributed in exchange for QUIPS if a dissolution and liquidation of the Trust
occurs. Accordingly, the QUIPS that an investor may purchase, or the Distributable HECO QUIDS that the holders of the QUIPS may receive on dissolution and liquidation of the Trust, may trade at a discount to the price that the investor paid to purchase the QUIPS.
Redemption Procedures
QUIPS redeemed on each Redemption Date shall be redeemed at the QUIPS Redemption Price with the applicable proceeds from the contemporaneous repayment or redemption of the QUIDS. Redemptions of the QUIPS shall be made and the QUIPS Redemption Price shall be payable on each Redemption Date only to the extent that the Trust has funds on hand available for the payment thereof. See also “—Subordination of Common Securities.”
If the Trust, by action of the Property Trustee, gives a notice of redemption in respect of any of the QUIPS, then, by 12:00 noon, New York City time, on the Redemption Date, and provided that the necessary funds are available, the Property Trustee will deposit irrevocably with DTC funds sufficient to pay the QUIPS Redemption Price and will give DTC irrevocable instructions and authority to pay the QUIPS Redemption Price to the holders of such QUIPS. See “—Book-Entry Issuance.” If such QUIPS are not in book-entry-only form, the Trust, provided that the necessary funds are available, will irrevocably deposit with the paying agent for the QUIPS funds sufficient to pay the QUIPS Redemption Price and will give such paying agent irrevocable instructions and authority to pay the QUIPS Redemption Price to the holders thereof upon surrender of their certificates evidencing such QUIPS. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any QUIPS called for redemption shall be payable to the holders of such QUIPS as they appear on the Securities Register for the QUIPS on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds irrevocably deposited as required, then upon the date of such deposit, all rights of the holders of such QUIPS so called for redemption will cease, except the right of the holders of such QUIPS to receive the QUIPS Redemption Price, but without interest on such QUIPS Redemption Price, and such QUIPS will cease to be outstanding. In the event that any Redemption Date of QUIPS is not a Business Day, then payment of the QUIPS Redemption Price payable on such Redemption Date will be made on the next succeeding day which is a Business Day, (and without any additional Distributions or other payment in respect of any such delay), except that,and, if such nextpayment is made or duly provided for on such Business Day, is in the next succeeding calendar year, such payment will be made on the immediately preceding Business Day (without any reduction in Distributions in respect of such early payment), in each case with the same force and effect as if made on the Redemption Date. In the event that payment of the QUIPS Redemption Price in respect of QUIPS called for redemption is improperly withheld or refused and not paid either by the Trust or by HECO pursuant to the Trust Guarantee, Distributionsno interest shall accrue on such QUIPS will continueamounts for the period from and after such Interest Payment Date or Stated Maturity, as the case may be, to accumulate,such Business Day. To the extent lawful, overdue installments of principal and interest shall bear interest at the then applicablea rate from the Redemptionof % per annum.
Any notice of redemption of QUIPS may state that such redemption shall be conditional upon the receipt by the Property Trustee not later than the close of business on the Business Day next preceding the Redemption Date of moneys sufficient to pay in full the QUIPS Redemption Price of such QUIPS. If the redemption notice states that it is conditional and such moneys shall not be so received by the close of business on the Business Day next preceding the Redemption Date, such notice of redemption shall be of no force and effect, the Property Trustee shall not redeem such QUIPS and the Property Trustee shall give notice to the registered owners of the QUIPS, in the manner in which the notice of redemption was given, that such moneys were not so received and that such redemption did not occur. In such event, the Property Trustee shall promptly return QUIPS which it has received to the registered owners thereof.
Subject to applicable laws (including, without limitation, Rule 14e-1 under the Exchange Act and any other applicable United States federal securities laws), HECO or its subsidiaries may at any time and from time to time purchase outstanding QUIPS by tender, in the open market or by private agreement.
Payment of the QUIPS Redemption Price and any distribution of Distributable HECO QUIDS to holders of QUIPS shall be made to the applicable record holders thereof as they appear on the register for such QUIPS on the relevant record date, which, as long as the QUIPS remain in book-entry form, shall be one Business Day prior to the relevant Redemption Date or liquidation date, as applicable; provided, however, that in the event that the QUIPS are not in book-entry form, the relevant record date for such QUIPS shall be the datefifteenth day (whether or not a Business Day) that is 15 daysnext preceding an Interest Payment Date.
If less than all of the QUIPS and the Common Securities issued by the Trust are to be redeemedin part, on a Redemption Date, then the aggregate liquidation preference of such QUIPS and the Common Securities to be redeemed shall be allocated among the QUIPS and the Common Securitiespro rata based on their respective aggregate liquidation preferences. If the QUIPS continue to be in book-entry form at the time of such redemption, the QUIPS to be redeemed will be redeemed in accordance with the procedures of DTC. If at such time the QUIPS are not in book-entry form, the particular QUIPS to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Property Trustee from the outstanding QUIPS not previously called for redemption, by lot or by such method as the Property Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $25 or an integral multiple of $25 in excess thereof) of the liquidation preference of QUIPS of a denomination larger than $25. The Trust may not redeem fewer than all of the outstanding QUIPS unless all accumulated and unpaid Distributions have been paid on all QUIPS for all quarterly distribution periods terminatingany Business Day on or prior to the Redemption Date. The Property Trustee shall promptly notify the Trust registrar in writing of the QUIPS selected for redemption and, in the case of any QUIPS selected for partial redemption, the liquidation preference thereof to be redeemed. For all purposes of the Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of QUIPS shall relate, in the case of any QUIPS redeemed or to be redeemed only in part, to the portion of the aggregate liquidation preference of QUIPS which has been or is to be redeemed.
Subordination of Common Securities
Payment of Distributions on, and theafter , 20 , at a redemption price of the QUIPS and the Common Securities, as applicable, shall be made among the QUIPS and the Common Securities pro rata based on the respective aggregate liquidation preference of such QUIPS and the Common Securities. However, if on any Distribution Date or Redemption Date a Debenture Event of Default shall have occurred and be continuing, no payment of any Distribution on, or redemption price of, any of the Common Securities, and no other payment on account of the redemption, liquidation or other acquisition of the Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all of the outstanding QUIPS for all distribution periods terminating on or prior thereto, or in the case of payment of the QUIPS Redemption Price the full amount of the QUIPS Redemption Price on all of the outstanding QUIPS then being redeemed, shall have been made or provided for, and all funds immediately available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions on, or QUIPS Redemption Price of, the QUIPS then due and payable.
In the case of any Event of Default under the Trust Agreement resulting from a Debenture Event of Default, HECO, as holder of the Common Securities, will be deemed to have waived any right to act with respect to any such Event of Default until the effect of such Event of Default has been cured, waived or otherwise eliminated. Until any such Event of Default has been so cured, waived or
otherwise eliminated, the Property Trustee shall act solely for the benefit of the holders of the QUIPS and not for the benefit of HECO, as holder of the Common Securities, and only the holders of the QUIPS will have the right to direct the Property Trustee to act for their benefit.
Liquidation Value; Liquidation Distribution Upon Dissolution
The amount payable on the QUIPS in the event of any liquidation of the Trust is $25 per QUIPS plus accumulated and unpaid Distributions, which under certain circumstances may be in the form of a distribution of a Like Amount of Distributable HECO QUIDS.
Pursuant to the Trust Agreement, the Trust shall automatically dissolve upon expiration of its term and shall dissolve on the first to occur of: (i) certain events of bankruptcy, dissolution or liquidation of HECO; (ii) upon 30 days’ prior written notice to the holders of the QUIPS, the written direction of HECO to the Property Trustee to dissolve the Trust and cause the distribution of a Like Amount of Distributable HECO QUIDS to the holders of the QUIPS and the Common Securities (which direction is wholly optional and within the discretion of HECO) (see “—Redemption or Exchange—Special Event Redemption or Distribution of QUIDS”); (iii) the redemption of all of the QUIPS and the Common Securities as described under “—Redemption or Exchange;” and (iv) the entry by a court of competent jurisdiction of an order for the dissolution of the Trust.
If an early dissolution occurs as described in clause (i), (ii) or (iv) above, the Trust shall be liquidated by the Trustees as expeditiously as the Trustees determine to be possible by distributing, subject to obtaining prior approval from the PUC and after satisfaction of liabilities to creditors of the Trust as provided by applicable law, to the holders of the QUIPS and the Common Securities a Like Amount of Distributable HECO QUIDS, unless such distribution is determined by the Property Trustee not to be practical, in which event such holders will be entitled to receive out of the assets of the Trust available for distribution to holders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to, in the case of holders of QUIPS, the liquidation preference thereof plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the “Liquidation Distribution”). If such Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the QUIPS shall be paid pro rata to the holders thereof based on their respective liquidation preferences. HECO, as holder of the Common Securities, will be entitled to receive distributions upon any such liquidation pro rata with the holders of the QUIPS, based on their respective aggregate liquidation preferences, except that if a Debenture Event of Default has occurred and is continuing, the QUIPS shall have a priority over the Common Securities in the right to receive such Liquidation Distributions and no Liquidation Distribution will be paid to the holders of the Common Securities unless and until receipt by all holders of the QUIPS of the entire Liquidation Distribution payable in respect thereof. See “—Subordination of Common Securities.”
Events of Default; Notice
Any one of the following events constitutes an “Event of Default” under the Trust Agreement (an “Event of Default”) with respect to the QUIPS (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default under any of the Indentures (see “Description of QUIDS—Debenture Events of Default”); or
(ii) default by the Property Trustee in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of 30 days; or
(iii) default by the Property Trustee in the payment of any redemption price of any QUIPS or Common Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of any covenant or warranty of the Trustees in the Trust Agreement (other than a covenant or warranty a default in the performance of which or the breach of which is covered by clause (ii) or (iii) above), and continuation of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the defaulting Trustee or Trustees by the holders of at least 25% in aggregate liquidation preference of the outstanding QUIPS, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with respect to the Property Trustee and the failure by HECO to appoint a successor Property Trustee within 60 days thereof.
Within 90 days after the occurrence of any Event of Default actually known to the Property Trustee, the Property Trustee shall transmit notice of such Event of Default to the holders of the QUIPS, the Administrative Trustees and HECO, as Depositor, unless such Event of Default shall have been cured or waived. HECO, as Depositor, and the Administrative Trustees are required to file annually with the Property Trustee a certificate as to whether or not they are in compliance with all the conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the QUIPS shall have a preference over the Common Securities upon dissolution of the Trust as described above. See “—Liquidation Value; Liquidation Distribution Upon Dissolution.”
Enforcement of Certain Rights by Holders of QUIPS
If an Event of Default has occurred and is continuing, then the holders of QUIPS would rely on the enforcement by the Property Trustee of its rights as a holder of the QUIDS against the respective Companies. If the Property Trustee fails to enforce such rights, a holder of QUIPS may, to the fullest extent permitted by law and subject to the terms of the Trust Agreement and the Indentures, institute a legal proceeding directly against any person (including any of the Companies) to enforce the Property Trustee’s rights with respect to QUIDS having a principal amount equal to the aggregate liquidation preference of the QUIPS of such holder without first instituting a legal proceeding against the Property Trustee or any other person. To the extent that any action under the applicable Indenture is entitled to be taken by the holders of at least a specified percentage% of the principal amount of the outstanding QUIDS, holdersNotes being redeemed, together with interest accrued on the Notes being redeemed to the redemption date. Notice of at leasteach such redemption must be given not more than 60 nor less than 30 days prior to the same percentagedate set for redemption.
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Removal of Trustees
Unless a Debenture Event of Default shall have occurred and be continuing, any Trusteecorresponding Notes. The Companies may be removedalso at any time and in their sole discretion determine not to have any Notes represented by the holder of the Common Securities. If a Debenture Event of Default has occurredone or more Global Securities and, is continuing, the Property Trustee and the Delaware Trustee may be removed atin such time by the holders of a majority in liquidation preference of the outstanding QUIPS. In no event, will issue individual definitive Notes in certificated form in exchange for the holders ofGlobal Securities representing the QUIPS have the right to vote to appoint, remove or replace the Administrative Trustees, which voting rights are vested exclusively in HECOcorresponding Notes. In addition, as the holder of the Common Securities. No resignation or removal of a Trustee and no appointment of a successor trustee shall be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the Trust Agreement.
Co-Trustees and Separate Property Trustee
Unlesssoon as reasonably practicable after an Event of Default, shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdictionCompanies are required to issue individual Notes in which any part of the Trust’s property may at the time be located, HECO, as Depositor, and the Administrative Trustees shall have power to appoint one or more persons approved by the Property Trustee either to act as a co-trustee, jointly with the Property Trustee, of all or any part of the Trust’s property, or to act as separate trustee ofcertificated form. In any such property,instance, an owner of a Note represented by a Global Security will be entitled to physical delivery of individual notes in either case with such powers as may be providedcertificated form equal in the instrumentprincipal amount of appointment,such Note and to vesthave such Notes in such person or personscertificated form registered in such capacity any property, title, right or power deemed necessary or desirable, subject to the provisions of the Trust Agreement. If HECO does not joinits name. Individual Notes in such appointment within 15 days after the receipt by it of a request to docertificated form so or in case a Debenture Event of Default has occurred and is continuing, the Property Trustee alone shall have power to make such appointment.
Merger or Consolidation of Trustees
Any entity into which the Property Trustee, the Delaware Trustee or any Administrative Trustee that is not a natural person may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, conversion or consolidation to which such Trustee shall be a party, or any entity succeeding to all or substantially all the corporate trust business of such Trustee, shall be the successor of such Trustee under the Trust Agreement, provided such entity shall be otherwise qualified and eligible under the Trust Agreement, without the execution or filing of any paper or any further act on the part of any of the parties to the Trust Agreement.
Merger, Consolidation, Conversion, Amalgamation or Replacement of the Trust
The Trust may not merge with or into, consolidate, convert, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to any entity, except as described below or as otherwise set forth in the Trust Agreement. The Trust may, at the request of HECO, with the consent of the Administrative Trustees and without the consent of the holders of the QUIPS, merge with or into, consolidate, convert, amalgamate, be replaced by or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to a trust organized as such under the laws of any State if (i) such successor entity either (a) expressly assumes all of the obligations of the Trust with respect to the QUIPS or (b) substitutes for the QUIPS other securities having substantially the same terms as the QUIPS (the “Successor Securities”) so long as the Successor Securities rank the same as the QUIPS rank with respect to Distributions and payments upon liquidation, redemption and otherwise, (ii) HECO expressly appoints a trustee of such successor entity possessing the same powers and duties as the Property Trustee as the holder of the QUIDS, (iii) the Successor Securities are listed, or any Successor Securitiesissued will be listed upon notification of issuance, on any national securities exchange or other organization on which the QUIPS are then listed, if any, (iv) such merger, consolidation, conversion, amalgamation, replacement, conveyance,
transfer or lease does not cause the QUIPS (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation, replacement, conveyance, conversion, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the QUIPS (including any Successor Securities)issued as registered Notes in any material respect, (vi) such successor entity has a purpose substantially similar to that of the Trust, (vii) prior to such merger, consolidation, conversion, amalgamation, replacement, conveyance, transfer, or lease, HECO has received an opinion of counsel to the Trust experienced in such matters to the effect that (a) such merger, consolidation, conversion, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the QUIPS (including any Successor Securities) in any material respect and (b) following such merger, consolidation, conversion, amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor such successor entity will be required to register as an “investment company” under the Investment Company Act, and (viii) HECO or any permitted successor or assignee owns all of the common securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Trust Guarantee and the Trust Agreement. Notwithstanding the foregoing, the Trust shall not, except with the consent of all holders of the QUIPS, consolidate, convert, amalgamate, merge with or into, be replaced by or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it, if such consolidation, conversion, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or the successor entity to be classified as other than a grantor trust for United States federal income tax purposes.
Voting Rights; Amendment of the Trust Agreement
Except as described below and under “Description of Trust Guarantee—Amendments and Assignment,” and except asdenominations, unless otherwise required by law, the Trust Agreement or the Indentures, the holders of the QUIPS will have no voting rights.
The Trust Agreement may be amended from time to time by HECO and the Administrative Trustees, without the consent of the holders of the QUIPS, (a) to cure any ambiguity, to correct or supplement any provisions in the Trust Agreement that may be inconsistent with any other provision, or to include any other provisions with respect to matters or questions arising under the Trust Agreement that shall not be inconsistent with the other provisions of the Trust Agreement, provided that any such amendment does not adversely affect the interests of any holder of QUIPS or Common Securities, or (b) to modify, eliminate or add to any provisions of the Trust Agreement to such extent as shall be necessary to ensure that the Trust will be classified for United States federal income tax purposes as a grantor trust at all times that any QUIPS and Common Securities are outstanding, or to ensure that the QUIDS will be treated as indebtedness of the Companies or to ensure that the Trust will not be required to register as an “investment company” under the Investment Company Act of 1940. Any such amendment of the Trust Agreement shall become effective when notice thereof is given to the holders of QUIPS and Common Securities.
The Trust Agreement may be amended by the Administrative Trustees and HECO with the consent of holders representing not less than a majority (based upon liquidation preference) of the outstanding QUIPS and Common Securities. Without the consent of each affected holder of QUIPS and Common Securities, however, the Trust Agreement may not be amended to (i) change the amount, timing or currency of any Distribution or Liquidation Distribution on the QUIPS or Common Securities or otherwise adversely affect the amount of any Distribution or Liquidation Distribution required to be made in respect of the QUIPS or Common Securities as of a specified date, (ii) change the redemption provisions of the QUIPS or Common Securities, (iii) restrict the right of a holder of QUIPS and Common Securities to institute suit for the enforcement of any such payment contemplated
in clause (i) or (ii) above on or after the related payment date, (iv) modify the purposes of the Trust, (v) authorize or issue any beneficial interest in the Trust other than as contemplated by the Trust Agreement, (vi) change the conditions precedent for HECO to elect to dissolve the Trust and distribute the Distributable HECO QUIDS to holders of QUIPS or (vii) affect the limited liability of any holder of QUIPS. No amendment of the Trust Agreement may be made without receipt by the Trust of an opinion of counsel experienced in such matters to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment will not affect the Trust’s status as a grantor trust for United States federal income tax purposes or the Trust’s exemption from regulation as an investment company under the Investment Company Act of 1940.
So long as any QUIDS are held by the Property Trustee, the Trustees shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee or executing any trust or power conferred on the Property Trustee with respect to the QUIDS, (ii) waive any past default that is waiveable under the applicable Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of the QUIDS shall be due and payable or (iv) consent to any amendment, modification or termination of the applicable Indenture, where such consent shall be required, without, in each case, obtaining the prior written consent of the holders of a majority in aggregate liquidation preference of the outstanding QUIPS; provided, however, that where such consent under the applicable Indenture would require the consent of each holder of QUIDS issued thereunder affected thereby, no such consent shall be given by the Property Trustee without the prior written consent of each holder of the outstanding QUIPS. The Trustees shall not revoke any action previously authorized or approved by a vote of the holders of the QUIPS, except by a subsequent vote of the holders of the QUIPS. The Property Trustee shall notify all holders of the QUIPS of any notice of default with respect to the QUIDS. In addition to obtaining the consent of the holders of the QUIPS, prior to taking any of the foregoing actions, the Trustees shall, at the expense of HECO, obtain an opinion of counsel experienced in such matters to the effect that the Trust will not be classified as an association taxable as a corporation or partnership for United States federal income tax purposes on account of such action and will continue to be classified as a grantor trust for United States federal income tax purposes.
Any required approval of holders of QUIPS may be given at a meeting of holders of QUIPS convened for such purpose or pursuant to written consent. The Property Trustee will cause a notice of any meeting at which holders of QUIPS are entitled to vote to be given to each holder of record of QUIPS in the manner set forth in the Trust Agreement.
No vote or consent of the holders of QUIPS will be required for the Trust to redeem and cancel the QUIPS in accordance with the Trust Agreement.
When holders of QUIPS are entitled to vote or consent under any of the circumstances described above, all of the QUIPS that are owned by the Companies, the Trusteesof $1,000 or any affiliate of the Companies or any Trustee shall, for purposes of such vote or consent, be treated as if they were not outstanding.
Payment and Paying Agency
If the QUIPS are not held by DTC or its nominee, payments in respect of the QUIPS shall be made by check mailed by the paying agent (the “Paying Agent”) to the address of the holder entitled thereto as such address shall appear on the register maintained by the Property Trustee. The initial Paying Agent shall be the Property Trustee and the Property Trustee may choose any co-paying agent which is acceptable to the Administrative Trustees and HECO. In the event that the Property Trustee shall no longer be the Paying Agent, the Administrative Trustees shall appoint a successorlarger amount that is acceptable to the Property Trustee and HECO (which shall be a bank or trust company having a combined capital and
surplusan integral multiple of at least $50,000,000) to act as Paying Agent.$1,000 thereof.
Book-Entry Issuance
DTC will act as securities depository for all of the QUIPS. The QUIPS will be issued only as fully-registered securities registered in the name of Cede & Co. (DTC’s nominee). One or more fully registered global certificates will be issued, representing in the aggregate the total number of the QUIPS, and will be deposited with DTC or its custodian.
DTC is a limited purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants (“Participants”) deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations andfollowing describes certain other organizations (“Direct Participants”). DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation (each of which is also a subsidiary of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain custodial relationships with Direct Participants, either directly or indirectly (“Indirect Participants”). The rules applicable to DTC and its Participants are on file with the SEC. More information about DTC can be found athttp://www.dtcc.com.
Purchases of QUIPS under the DTC system must be made by or through Direct Participants, which will receive a credit for the QUIPS on DTC’s records. The ownership interest of each actual purchaser of each QUIPS (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased QUIPS. Transfers of ownership interests in the QUIPS are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in QUIPS, except in the event that useaspects of the book-entry system for the QUIPS is discontinued. The laws of some states may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in the global certificate representing the QUIPS.system:
| 1. DTC will act as securities depositary for the Global Securities. The Global Securities will be issued only as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee). One or more fully-registered Global Securities will be issued for each issue of the Notes having the same Original Issue Date and terms, representing in the aggregate the aggregate principal amount of such issue, and will be deposited with DTC or a custodian. | |
| 2. DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve Board, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants (“Participants”) deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations (“Direct Participants”). DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation (each of which is also a subsidiary of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain custodial relationships with Direct Participants, either directly or indirectly (“Indirect Participants”). The rules applicable to DTC and its Participants are on file with the SEC. More information about DTC can be found at www.dtcc.com. | |
| 3. Purchases of Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Notes on DTC’s records. The ownership interest of each actual purchaser of each Note (“Beneficial Owner”) is in turn to be recorded on the |
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To facilitate subsequent transfers, all QUIPS deposited by Direct Participants with DTC (or its custodian) are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the QUIPS with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the QUIPS. DTC’s records reflect only the identity of the Direct Participants to whose accounts such QUIPS are credited,
which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners, and the voting rights of Direct Participants, Indirect Participants and Beneficial Owners, will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices will be sent to Cede & Co. as the registered holder of the QUIPS. If less than all of the QUIPS are being redeemed, DTC will determine the amount of the interest of each Direct Participant to be redeemed in accordance with its procedures.
Although voting with respect to the QUIPS is limited to the holders of record of the QUIPS, in those instances in which a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to QUIPS. Under its usual procedures, DTC would mail an omnibus proxy (the “Omnibus Proxy”) to the Property Trustee as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts such QUIPS are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Distribution payments on the QUIPS will be made by the Property Trustee to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts on the relevant payment date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC (nor its nominee), the Property Trustee, the Trust or the Companies, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of Distributions to DTC is the responsibility of the Property Trustee, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursements of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the QUIPS at any time by giving reasonable notice to the Property Trustee and HECO. In the event that a successor securities depository is not obtained, definitive QUIPS certificates representing such QUIPS are required to be printed and delivered. HECO, at its option, may decide to discontinue use of the system of book-entry transfers through DTC (or a successor depository). After a Debenture Event of Default, the holders of a majority in liquidation preference of QUIPS may determine to discontinue the system of book-entry transfers through DTC. In either such event, definitive certificates representing the QUIPS will be printed and delivered.
| Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant that purchased the Notes. Transfers of ownership interests in the Notes are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Notes, except in the event that use of the book-entry system for the Notes is discontinued. The laws of some states may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in the global certificate representing the Notes. | |
| 4. To facilitate subsequent transfers, all Global Securities deposited by Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Global Securities with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership of the Notes. DTC has no knowledge of the actual Beneficial Owners of the Notes. DTC’s records reflect only the identity of the Direct Participants to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. | |
| 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners, and the voting rights of Direct Participants, Indirect Participants and Beneficial Owners, will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices will be sent to Cede & Co. as the registered holder of the Notes. If less than all of the Notes are being redeemed, DTC will determine the amount of the interest of each Direct Participant to be redeemed in accordance with its procedures. | |
| 6. Neither DTC nor Cede & Co. will consent or vote with respect to the Notes. Under its usual procedures, DTC mails an Omnibus Proxy to the company involved as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy). | |
| 7. Principal and interest payments on the Notes will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts on the date on which interest is payable in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on such date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as in the case of securities held for the accounts of customers in bearer form or registered in “street name”, and will be the responsibility of such Participant and not of DTC (nor its nominee), the Trustee or the Companies, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Trustee, disbursement of such payments to Direct Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. |
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Registraroperations or for any aspect of the records relating to or payments made on account of beneficial interests in such Global Security or for maintaining, supervising or reviewing any records relating to such beneficial interests.
Replacement of Notes
Transfers of QUIPSall in its discretion. No service charge will be registered upon payment bymade for any transfer or exchange of the transfereeNotes, but the person requesting registration of such transfer or exchange may be required to pay a sum sufficient to cover any tax or other governmental charges thatcharge payable in connection therewith.
Information Concerning the Property Trustee
The Property Trustee, other than during the occurrence and continuance of an Event of Default, undertakes to perform only such duties as are specificallyrequirements set forth in the Trust AgreementIndenture. Among other things, if a Note is destroyed, lost or stolen, as a condition to the issuance of a new Note, the Company and afterthe Trustee must receive evidence to their satisfaction of the ownership of, and of the destruction, loss or theft of, the Note and such Eventsecurity or indemnity as they may reasonably require. The Company may also charge the holder for taxes and other governmental charges related to the issuance of a new Note and any other reasonable expenses connected therewith, including the fees and expenses of the Trustee.
Miscellaneous
The Administrative Trustees and HECO, as Depositor, are authorized and directed to conduct the affairs of and to operate the Trust in such a way that it will not be deemed to be an “investment company” required to be registered under the Investment Company Act of 1940, or be classified as an association taxable as a corporation, a partnership or other than as a grantor trust for United States federal income tax purposes, and so that the QUIDS will be treated as indebtedness of the respective Companies for United States federal income tax purposes. In this connection, each of the Companies and the Administrative Trustees are authorized to take any action, not inconsistent with applicable law, the certificate of trust of the Trust or the Trust Agreement, that the Companies (or any of them) and the Administrative Trustees determine in their discretion to be necessary or desirable for such purposes. HECO and the Trustees may amend the Trust Agreement, without the consent of the holders of the QUIPS and even if such amendment would adversely affect the interests of such holders, as shall be necessary to ensure that the Trust will be classified for United States federal income tax purposes as a grantor trust and will not be required to register as an “investment company” under the Investment Company Act of 1940 and to ensure that the QUIDS will be treated as indebtedness of the Companies. See “—Voting Rights; Amendment of the Trust Agreement.”
Holders of the QUIPS have no preemptive or similar rights to subscribe for the beneficial or equity interests of the Trust or of any of the Companies.
The Trust may not borrow money or issue debt or mortgage or pledge any of its assets.
The QUIDSIndenture of each of the Companies arewith respect to be issued under its Junior Indenture as supplementedeach series of Notes from time to time (as so supplemented, the “HECO Indenture,” the “MECO Indenture” and the “HELCO Indenture,” and, collectively, the “Indentures”), between each such Company and The Bank of New York, as Debenture Trustee. Except in instances where certain elections must be made by all Companies at the direction of HECO under all of the Indentures, and except for the provisions providing for the exchange of Substituted HECO QUIDS for the MECO QUIDS and HELCO QUIDS and as otherwise described below, the provisions of the Indentures are substantially similar. The following is a summary of certain of the terms and provisions of the QUIDS and the Indentures. This summary is not a complete description of all the terms and provisions of the QUIDS and the Indentures. For more information, we refer you to the forms of Indentures, which have been filed as exhibits to the registration statement of which this prospectus forms a part. Unless the context otherwise requires, the term QUIDS includes the Substituted HECO QUIDS.outstanding thereunder:
| (a) failure to pay any interest on any Indenture Security of such series (either by such Company or, with respect to the HELCO Indenture and the MECO Indenture, by HECO under its guarantee) within 30 days after the same becomes due and payable; | |
| (b) failure to pay any principal of or premium, if any, on any Indenture Security of such series (either by such Company or, with respect to the HELCO Indenture and the MECO Indenture, by HECO under its guarantee) within three Business Days after the same becomes due and payable; |
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General
Concurrently with the issuance of the QUIPS, the Trust will purchase the QUIDS with the proceeds from the sale of the QUIPS and the Common Securities. The QUIDS will bear interest at the annual rate of % of the principal amount thereof from the date of original issuance, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year (each,
| (c) failure to perform or breach of any covenant or warranty of the Company in its respective Indenture (other than a default in or breach of a covenant or warranty of the Company which is dealt with elsewhere in the “Event of Default” section of its Indenture or which was expressly included in its Indenture solely for the benefit of one or more series of Indenture Securities other than the Notes), for 60 days after written notice to the Company by the Trustee, or to the Company and the Trustee by the Holders of at least 33% in principal amount of the Indenture Securities of such series outstanding under the Indenture as provided in the Indenture, unless the failure to perform or breach is not reasonably susceptible of being cured or corrected within such60-day period, in which case such failure or breach shall not constitute an Event of Default if the Company institutes corrective action within such60-day period and diligently pursues it to completion within 150 days of such notice; | |
| (d) certain events of or related to bankruptcy, insolvency or reorganization of the Company; or | |
| (e) any other Event of Default specified with respect to Indenture Securities of such series. |
The QUIDS will be issued by each of the Companies under the applicable Indenture. The QUIDS will mature on March , 2034, which maturity may be shortened or extended at any time at the election of HECO (which election shall apply to the MECO QUIDS and the HELCO QUIDS, as well as the HECO QUIDS and, if issued, all of the Substituted HECO QUIDS) for one or more periods, but in no event to a date earlier than March , 2009 or to a date later than March , 2053, provided that at the time such election is made and at the time of any such shortening or extension (i) none of the Companies is in bankruptcy, otherwise insolvent or in liquidation, (ii) none of the Companies is in default in the payment of any interest or principal on the QUIDS, (iii) the Trust is not in arrears on payments of Distributions on the QUIPS and no deferred Distributions are accumulated and (iv) the QUIPS, or if the Distributable HECO QUIDS have been distributed to the holders of the QUIPS, the
Distributable HECO QUIDS, are rated not less than BBB- by Standard & Poor’s or Baa3 by Moody’s Investors Service, Inc., or the equivalent by any other nationally recognized statistical rating organization.
The QUIDS of each Company will be unsecured and will be junior to all Senior Indebtedness of the respective issuing Company and will rank equally with any other series of junior subordinated deferrable interest debentures issued by that Company, including (until their respective defeasance or redemption) the two series of junior subordinated deferrable interest debentures, each in an aggregate principal amount of $50 million, issued by the Companies in 1997 and 1998. The Companies will use the proceeds of this offering to cause the redemption of the series of such debentures issued in 1997 as described under “Use of Proceeds.” Since HECO receives dividends and interest payments from MECO and HELCO, and since certain of the operating assets of the Companies are owned by MECO and HELCO, the HECO QUIDS will also be effectively subordinated to all existing and future liabilities of MECO and HELCO. The Indentures do not limit the incurrence or issuance of other secured or unsecured debt of the applicable Company, whether thereunder or under any existing or other indenture that such Company may enter into in the future or otherwise. See “—Subordination.”
Additional Sums
If the Trust is required to pay any additional taxes, duties or other governmental charges, each of the Companies will pay as Additional Sums on its respective QUIDS its proportionate share of such amounts as shall be required so that the Distributions payable by the Trust shall not be reduced as a result of any such additional taxes, duties or other governmental charges.
Denominations, Registration and Transfer
The QUIDS will be issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. QUIDS will be exchangeable for other QUIDS issued by the same Company, of any authorized denominations, of a like aggregate principal amount, having the same date of original issuance and Stated Maturity and bearing the same interest rate.
QUIDS may be presented for exchange as provided above, and may be presented for registration of transfer (with the form of transfer endorsed thereon, or a satisfactory written instrument of transfer, duly executed), at the office of the appropriate securities registrar or at the office of any transfer agent designated by the respective Companies for such purpose, without service charge and upon payment of any taxes and other governmental charges as described in the applicable Indenture. Each of the Companies will appoint the Debenture Trustee as the initial securities registrar and transfer agent under the applicable Indenture. Each of the Companies may at any time rescind the designation of any such securities registrar or transfer agent or approve a change in the location through which any such securities registrar or transfer agent acts, provided that such Company maintains a transfer agent in each place of payment for such QUIDS. Each of the Companies may at any time designate additional transfer agents with respect to its respective QUIDS.
In the event of any redemption, neither any of the Companies nor the securities registrar shall be required to (i) issue, register the transfer of or exchange the respective QUIDS of such Company during a period beginning at the opening of business 15 days before the day of mailing of notice of redemption of any QUIDS and ending at the close of business on the day of mailing of the relevant notice of redemption or (ii) transfer or exchange any QUIDS so selected for redemption, except, in the case of any QUIDS being redeemed in part, any portion thereof not to be redeemed.
Payment and Paying Agents
During the period that QUIDS are not held by a depository or the Trust, payment of principal of and any interest on QUIDS at Stated Maturity or earlier redemption will be made at the office of the
Debenture Trustee in The City of New York, or at the office of such Paying Agent or Paying Agents as the Companies may designate from time to time, upon surrender of the QUIDS. During such period, at the option of the Companies, payment of any interest other than at Stated Maturity or earlier redemption shall be made (i) by check mailed to the address of the person entitled thereto as such address shall appear in the securities register or (ii) by transfer to an account maintained by the person entitled thereto as specified in the securities register, provided that proper transfer instructions have been received by the Regular Record Date; provided, however, that such payment, at the written request of a holder of at least $10,000,000 aggregate principal amount of QUIDS, will be payable by wire transfer in immediately available funds pursuant to the terms of the Indentures. Payment of any such interest on QUIDS will be made to the person in whose name such QUIDS is registered at the close of business on the Regular Record Date for such interest, except in the case of defaulted interest. The Companies may at any time designate additional Paying Agents or rescind the designation of any Paying Agent; however, the Companies will at all times be required to maintain a Paying Agent in each place of payment for the QUIDS.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or then held by HECO in trust, for the payment of the principal of or interest on any QUIDS and remaining unclaimed for two years after such principal or interest has become due and payable shall, at the request of HECO, be repaid to HECO and the holder of such QUIDS shall thereafter look, as a general unsecured creditor, only to HECO for payment thereof and all liability of the Debenture Trustee or any Paying Agent with respect to such moneys shall thereupon cease.
Redemption
The QUIDS are redeemable prior to maturity (i) at the option of each of the respective Companies on or after March , 2009, in whole at any time or in part from time to time, at the QUIDS Redemption Price or (ii) at the option of HECO on behalf of the Companies at any time in whole (but not in part), upon the occurrence and continuation of a Special Event, at the QUIDS Redemption Price. QUIDS will not be subject to any sinking fund. QUIDS in denominations larger than $25 may be redeemed in part but only in integral multiples of $25.
Notice of any redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each holder of QUIDS to be redeemed at its registered address. Any notice of redemption of QUIDS may state that such redemption shall be conditional upon the receipt by the Debenture Trustee not later than the close of business on the Business Day next preceding the Redemption Date of moneys sufficient to pay in full the QUIDS Redemption Price of such QUIDS. If the redemption notice states that it is conditional and such moneys shall not be so received by the close of business on the Business Day next preceding the Redemption Date, such notice of redemption shall be of no force and effect, such QUIDS shall not be redeemed and the Debenture Trustee shall give notice to the registered owners of the QUIDS, in the manner in which the notice of redemption was given, that such moneys were not so received and that such redemption did not occur. In such event, the Debenture Trustee shall promptly return QUIDS which it has received to the registered owners thereof. Unless there is a default in payment of the QUIDS Redemption Price, on and after the Redemption Date, interest ceases to accrue on such QUIDS or portions thereof called for redemption.
Option to Extend Interest Payment Period
So long as no Event of Default under its Indenture has occurred and is continuing, each Company has the right under the applicable Indenture to defer the payment of interest at any time or from time to time for a period (including any extensions thereof) not exceeding 20 consecutive quarters with respect to each Extension Period, provided that no Extension Period may extend beyond the Stated Maturity of the QUIDS. At the end of such Extension Period, the deferring Company must pay all interest then
accrued and unpaid (together with interest thereon at the annual rate of %, compounded quarterly, to the extent permitted by applicable law). During an Extension Period, interest will continue to accrue and beneficial owners of QUIDS (or beneficial owners of QUIPS) will be required to accrue interest income for United States federal income tax purposes. See “Description of QUIPS—Distributions” and “Certain United States Federal Income Tax Consequences—Stated Interest and Original Issue Discount.”
During an Extension Period, each deferring Company (and, if such deferring Company is MECO or HELCO, HECO) will not be permitted, either directly or indirectly through a subsidiary, subject to certain exceptions, to declare or pay any cash distributions with respect to its capital stock or debt securities that rank equally with or junior to the QUIDS so deferred, as described under “—Certain Covenants.”
Certain Covenants
Each of the Companies (and, in the case of clause (C) below, if such Company is MECO or HELCO, HECO) will covenant that it will not, either directly or indirectly through a subsidiary, (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of such Company’s capital stock or (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities (including other junior subordinated deferrable interest debentures of such Company) that rank equally with or junior in interest to its QUIDS or (iii) make any guarantee payments with respect to any guarantee issued by such Company if such guarantee ranks equally with or junior in interest to its QUIDS (other than (a) dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, its common stock and exchanges or conversions of common stock of one class for common stock of another class, (b) payments by HECO under the Trust Guarantee (or under any other guarantee by HECO with respect to any securities of its subsidiaries, provided that the proceeds from the issuance of such securities were applied to purchase junior subordinated deferrable interest debentures of HECO or any such subsidiary) and the Subsidiary Guarantees and (c) purchases of its common stock required to prevent the loss or secure the renewal or reinstatement of any government license or franchise held by HECO or any of its subsidiaries) if at such time (A) there shall have occurred any event of which such Company has actual knowledge that (1) with the giving of notice or the lapse of time, or both, would constitute a Debenture Event of Default with respect to its QUIDSany series of Indenture Securities occurs and (2)is continuing, then either the Trustee or the Holders of not less than 33% in respectprincipal amount of whichthe outstanding Indenture Securities of such Company shall not have taken reasonable steps to cure, (B) HECO shallseries may declare the principal amount (or if the Indenture Securities of such series are discount notes or similar Indenture Securities, such portion of the principal amount as may be in defaultspecified with respect to any paymentsuch series) of all of the Indenture Securities of such series to be due underand payable immediately, provided, however, that upon the Trust Guarantee, (C) such Company shall have given notice of its electionoccurrence of an Extension Period asevent of or related to bankruptcy, insolvency or reorganization of the Company which constitutes an Event of Default, all the outstanding Indenture Securities shall become immediately due and payable without any action by the Trustee or any Holder, and provided, in the applicable Indenturefurther, that if an Event of Default occurs and is continuing with respect to its QUIDS and shall not have rescinded such notice, or such Extension Period, or any extension thereof, shall be continuing or (D) inmore than one series of Indenture Securities, the case of HECO, there shall have occurred a default under either Subsidiary Guarantee.
HECO will also covenant (i) to maintain directly or indirectly 100% ownership of the Common Securities of the Trust, provided that certain successors which are permitted pursuant to such Indenture may succeed to HECO’s ownership of the Common Securities, (ii) not to voluntarily dissolve, wind-up or liquidate the Trust, except (a) in connection with a distribution of Distributable HECO QUIDS to the holders of the QUIPS in liquidation of the Trust or (b) in connection with certain mergers, consolidations or amalgamations permitted by the Trust Agreement, and (iii) to use its reasonable efforts, consistent with the terms and provisions of the Trust Agreement, to cause the Trust to remain classified as a grantor trust and not as an association taxable as a corporation for United States federal income tax purposes.
Modification of Indenture
From time to time any of the Companies and the Debenture Trustee may, without the consent of the holders of the QUIDS of such Company, amend, waive or supplement the applicable Indenture for
specified purposes, including, among other things, curing ambiguities, defects or inconsistencies and qualifying, or maintaining the qualification of, such Indenture under the Trust Indenture Act (provided that any such action does not adversely affect the interests of the holders of such QUIDS or the holdersHolders of the QUIPS so long as they remain outstanding). Each Indenture contains provisions permitting the applicable Company and the Debenture Trustee, with the consent of the holders of a majoritynot less than 33% in aggregate principal amount of the outstanding QUIDS affected thereby, to modifyIndenture Securities of all such Indenture in a manner affectingseries, considered as one class, may make such declaration of acceleration and not the rights of the holders of such QUIDS; provided that no such modification may, without the consent of the holder of each outstanding QUIDS so affected, (i) change the Stated Maturity of QUIDS, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon (except such change or extension as is contemplated thereby) or (ii) reduce the percentage of principal amount of QUIDS, the holders of which are required to consent to any such modification of such Indenture, provided that so long as any of the QUIPS remain outstanding, no such modification may be made that adversely affects the holders of such QUIPS and no terminationHolders of the Indenture may occur, and no waiverSecurities of any Debenture Event of Default or compliance with any covenant under such Indenture may be effective, without the prior consent of the holders of a majority of the aggregate liquidation preferenceone of such QUIPS unless and untilseries.
In addition, each of the Companies and the Debenture Trustee may execute, without the consent of any holder of QUIDS, any supplemental indenture for the purpose of creating any new series of junior subordinated deferrable interest debentures.
Debenture Events of Default
Each Indenture provides that any one or more of the following eventsacceleration with respect to the QUIDS issued thereunder thatIndenture Securities of any series has occurredbeen made and before a judgment or decree for payment of the money due has been obtained by the Trustee as provided in the respective Indenture, the Event or Events of Default giving rise to such declaration of acceleration will, without further act, be deemed to have been waived, and such declaration and its consequences will, without further act, be deemed to have been rescinded and annulled, if
| (a) the Company (or HECO with respect to the HELCO Indenture and the MECO Indenture) has paid or deposited with the Trustee a sum sufficient to pay: (1) all overdue interest on all Indenture Securities of such series; (2) the principal of and premium, if any, on any Indenture Securities of such series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Indenture Securities; (3) interest upon overdue interest at the rate or rates prescribed therefor in such Indenture Securities, to the extent that payment of such interest is lawful; and (4) all amounts due to the Trustee under the Indenture; and | |
| (b) any other Event or Events of Default with respect to the Indenture Securities of such series, other than the nonpayment of the principal of the Indenture Securities of such series which has become due solely by such declaration of acceleration, have been cured or waived as provided in the respective Indenture. |
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(i) failure for 30 days to pay any interest on such series of such QUIDS, when due (subject to the deferral of any due date in the case of an Extension Period); or
(ii) failure to pay any principal of such QUIDS when due whether at Stated Maturity, upon redemption, upon acceleration or otherwise; or
(iii) failure to observe or perform in any material respect certain other covenants contained in such Indenture for 90 days after written notice to the applicable Company from the Debenture Trustee or the holders of at least 25% in aggregate principal amount of such outstanding QUIDS (provided that such 90-day period shall be automatically extended if corrective action is initiated by the applicable Company within such period and is being diligently pursued); or
(iv) certain events in bankruptcy, insolvency or reorganization of HECO and, if such Indenture is the MECO Indenture or the HELCO Indenture, of MECO or HELCO, respectively.
The holdersHolders of a majority in aggregate outstanding principal amount of QUIDS issued under anythe outstanding Indenture Securities of such series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee under such Indenture. The Debenture Trustee, or exercising any trust or power conferred on the holders of not less than 25% in aggregate outstanding principal amountTrustee, with respect to the Indenture Securities of such QUIDS may declare the principal due and payable immediately upon a Debentureseries; provided, however, that if an Event of Default occurs and shouldis continuing with respect to more than one series of Indenture Securities, the Debenture Trustee or such holders of such QUIDS fail to make such declaration, the holders of at least 25% in aggregate liquidation preference of the QUIPS shall have such right. If a Debenture Event of Default specified in clause (iv) above occurs, the principal of and interest on the QUIDS shall become and be immediately due and payable without any declaration or other act on the part of the Debenture Trustee or any holder of QUIDS. The holdersHolders of a majority in aggregate outstanding principal amount
of such QUIDS may annul such declaration and waive the default if the default (other than the non-payment of the principal of such QUIDS which has become due solely by such acceleration) has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Debenture Trustee. However, if (a) the principal of the QUIDS has been declared due and payable by the holders of the QUIPS, no rescission of such acceleration will be effective unless consented to by the holders of a majority in aggregate liquidation preference of the QUIPS and (b) the holders of such QUIDS fail to annul such declaration and waive such default, the holders of a majority in aggregate liquidation preference of the QUIPS shall have such right.
The holders of a majority in aggregate outstanding principal amount of the QUIDS issued underoutstanding Indenture Securities of all such series, considered as one class, will have the right to make such direction, and not the Holders of the Indenture Securities of any one of such series; and provided, further, that (a) such direction will not be in conflict with any rule of law or with the respective Indenture and shall not involve the Trustee in a risk of personal liability in circumstances where reasonable indemnity would not, in the Trustee’s sole discretion, be adequate, (b) the Trustee may take any other action it deems proper which is not inconsistent with such direction, and (c) the Trustee shall not be obligated to take any action unduly prejudicial to Holders not joining in such direction. The right of a Holder of any Indenture Security of such series to institute a proceeding with respect to the respective Indenture is subject to certain conditions precedent which may prevent the Holder from instituting a proceeding, but each Holder has an absolute right to receive payment of principal and interest when due and to institute suit for the enforcement of any such payment. Each Indenture provides that a court may in its discretion require a Holder instituting suit for enforcement of any right or remedy under the holdersIndenture, or against the Trustee, to file an undertaking to pay the costs of such suit and in certain circumstances to assess costs of suit, including reasonable attorneys’ fees, against such a Holder, provided, however, that this provision does not apply to suits instituted by one or more Holders holding in aggregate more than 10% in aggregate principal amount of the Outstanding Securities of all series in respect of which such suit is brought or by Holders seeking to enforce payment after Maturity. The respective Indenture provides that the Trustee, within 90 days after the occurrence of any default thereunder with respect to the Indenture Securities of a majority in aggregate liquidation preferenceseries, is required to give the Holders of the QUIPS, may, on behalfIndenture Securities of all holders, waivesuch series notice of any past default under such Indenture,known to it, unless cured or waived; provided, however, that, except in the case of a default in the payment of principal of or interest, (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Debenture Trustee) or a default in respect of a covenant or provision which under suchif any, on any Indenture cannot be modified or amended without the consent of the holder of eachSecurities of such outstanding QUIDS. Each ofseries, the Companies is required to file annually withTrustee may withhold such notice if the Debenture Trustee a certificate as to whether or not such Companydetermines in good faith that it is in compliance with all the conditionsinterest of such Holders to do so; and covenants applicable to it under such Indenture.
Inprovided, further, that in the case a Debentureof an Event of Default of the character specified above in clause (c) under “Events of Default,” no such notice shall occur and be continuing as to QUIDS issued under any Indenture, the Property Trustee will have the right to declare the principal of and the interest on such QUIDS, and any other amounts payable under such Indenture, to be due and payable immediately and to enforce its other rights as a creditor with respectgiven to such QUIDS.
Enforcement of Certain Rights by Holders of QUIPS
until at least 75 days after the occurrence thereof.
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The holders of the QUIPS will not be able to exercise directly any remedies other than those set forth in the preceding paragraph available to the holders of the QUIDS unless the Property Trustee or the Debenture Trustee, acting for the benefit of the Property Trustee, fails to do so for 60 days. In such event, the holders of at least 25% in aggregate liquidation preference of the outstanding QUIPS will have the right to institute proceedings.
Consolidation, Merger, Sale of Assets and Other Transactions
Each Indenture provides that the applicable Company shall not consolidate with or merge into any other entitycorporation or corporations or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to any entity, and no entity shall consolidate with or merge into such Company or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety (either in one
transaction or in a series of transactions) to such Company, unless (i) if such Company consolidates with or merges into another entity, or conveys, transfers or leases its properties and assets substantially as an entirety to any entity,Person or Persons unless (a) the successor entitycorporation or corporations formed by such consolidation or into which the Company is merged or the Person or Persons which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety, is organized and existing under the laws of the United States orof America, any stateState thereof or the District of Columbia, and the successor entity expressly assumes, such Company’s obligationsby supplemental indenture in form satisfactory to the Trustee, the due and punctual payment of the principal of and interest, if any, on all the QUIDS issuedoutstanding Indenture Securities and the performance of all of the covenants of the Company under such Indenture; (ii)its respective Indenture, (b) immediately after giving effect thereto,to such transaction (and treating any indebtedness for borrowed money which becomes an obligation of the Company as a result of such transaction as having been incurred by the Company at the time of such transaction) no Debenture Event of Default, and no event which after notice or lapse of time or both would become a Debenturean Event of Default, shallwill have happenedoccurred and be continuing; (iii) such transaction is permitted undercontinuing, and (c) the Trust Agreement or the Trust Guarantee and does not give rise to any breach or violation of the Trust Agreement or the Trust Guarantee, and (iv) certain other conditions specified in such Indenture are met.
The provisions of the Indentures do not afford holders of the QUIDS protection in the event of a highly leveraged or other transaction involving the Companies, or in the event of a change in control thereof, that may adversely affect holders of the QUIDS.
Satisfaction and Discharge
Each Indenture provides that when, among other things, all QUIDS of a particular series issued thereunder not previouslyCompany will have delivered to the Debenture Trustee for cancellation (i) have become duean Officers’ Certificate and payablean Opinion of Counsel as provided in its respective Indenture.
| (a) to evidence the succession of another Person to the Company (or HECO with respect to the HELCO Indenture and the MECO Indenture) and the assumption by any such successor of the covenants of the Company in its respective Indenture and the Indenture Securities or the covenants of HECO under its guarantee; or | |
| (b) to add to the covenants of the Company (or HECO with respect to the HELCO Indenture and the MECO Indenture) for the benefit of the Holders of all or any series of outstanding Indenture Securities, or any tranche thereof, or to surrender any right or power conferred upon the Company (or HECO with respect to the HELCO Indenture and the MECO Indenture) by its respective Indenture; or | |
| (c) to add any additional Event of Default with respect to all or any series of outstanding Indenture Securities or any tranche thereof; or | |
| (d) to change or eliminate any provision of the Indenture or to add any new provision to the Indenture, provided that if such change, elimination or addition will adversely affect the interests of the Holders of Indenture Securities of any series or tranche thereof in any material respect, such change, elimination or addition will become effective with respect to such series |
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| or tranche only when there is no Indenture Security of such series or tranche remaining outstanding under the respective Indenture; or | |
| (e) to provide collateral security for the Indenture Securities of any series or tranche thereof; or | |
| (f) to establish the form or terms of Indenture Securities of any series or tranche thereof as permitted by the respective Indenture; or | |
| (g) to evidence and provide for the acceptance of appointment of a successor Trustee under the respective Indenture with respect to the Indenture Securities of one or more series and to add to or change any of the provisions of the respective Indenture as shall be necessary to provide for or to facilitate the administration of the trusts under the Indenture by more than one trustee; or | |
| (h) to add to or change any of the provisions of the respective Indenture to permit or facilitate the issuance of Indenture Securities in bearer, form, registrable or not registrable as to principal, and with or without interest coupons, or to permit or facilitate the utilization of a noncertificated system of registration for any series of Indenture Securities; or | |
| (i) to change any place where (1) the principal of and interest, if any, on Indenture Securities of any series, or any tranche thereof, shall be payable, (2) any Indenture Securities of any series, or any tranche thereof, may be surrendered for registration of transfer, (3) any Indenture Securities of any series, or any tranche thereof, may be surrendered for exchange and (4) notices and demands to or upon the Company in respect of the Indenture Securities of any series, or any tranche thereof, and the respective Indenture may be served; or | |
| (j) to cure any ambiguity, to correct any defect or inconsistency or to make any other provisions with respect to matters or questions arising under the respective Indenture, provided such provisions shall not adversely affect the interests of the Holders of Indenture Securities of any series or tranche thereof in any material respect. |
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Distribution of QUIDS; Exchange of Substituted HECO QUIDS for MECO and HELCO QUIDS
If HECO elects in its sole discretion to dissolve the Trust, subject to obtaining prior approval from the PUC, Distributable HECO QUIDS may be distributed to the holders of the QUIPS in liquidation of the Trust after satisfaction of liabilities to creditors of the Trust as provided by applicable law. If distributed to holders of QUIPS in liquidation, such QUIDS will initially be issued in the form of one or more global securities (“Global QUIDS”) and DTC, or any successor depository for the QUIPS, will act as depository for such QUIDS. It is anticipated that the depository arrangements for such QUIDS would be substantially identical to those in effect for the QUIPS. If such QUIDS are distributed to the holders of QUIPS upon the liquidation of the Trust, HECO will use its best efforts to list the Distributable HECO QUIDS on the New York Stock Exchange or such other stock exchanges, if any, on which the QUIPS are then listed. There can be no assurance as to the market price of any such QUIDS that may be distributed to the holders of QUIPS. For a description of DTC and the terms of the depository arrangements, see “Description of QUIPS—Book-Entry Issuance.”
Global QUIDS shall be exchangeable for QUIDS registered in the names of persons other than DTC or its nominee only if (i) DTC notifies the Companies that it is unwilling or unable to continue as a depository for such Global QUIDS and no successor depositorythere shall have been appointed,irrevocably deposited with the Trustee, in trust (a) money in an amount which will be sufficient, or if at any time DTC ceases(b) in the case of a deposit made prior to be a clearing agency registered under the Exchange Act at a time when DTC is required to be so registered to act as such depository, (ii) HECO in its sole discretion on behalfMaturity of the Companies determines that such Global QUIDS shall be so exchangeable,Notes, Government Obligations (as defined below), which do not contain provisions permitting the redemption or (iii) there shall have occurredother prepayment thereof at the option of the issuer thereof, the principal of and be continuing a Debenture Event of Defaultthe interest on which when due, without any regard to reinvestment thereof, will provide monies which, together with respect to such Global QUIDS. Any Global QUIDS that are exchangeable pursuant to the preceding sentence shall be exchangeable for
definitive certificates registered in such names as DTC shall direct. It is expected that such instructionsmoney, if any, deposited with or held by the Trustee, will be based upon directions received by DTC from its Participants with respect to ownershipsufficient, or (c) a combination of beneficial interests in such Global QUIDS. In the event that QUIDS are issued in definitive form, such QUIDS(a) and (b) which will be in denominationssufficient, to pay when due the principal of $25 and integral multiples thereof.
In order to effect a distribution of Distributable HECO QUIDS to holders of the QUIPS in liquidation of the Trust, HECO will issue to the Trust Substituted HECO QUIDS in exchange for the MECO QUIDS and the HELCO QUIDS in the aggregate principal amount of such MECO QUIDS and HELCO QUIDS, and the Substituted HECO QUIDS, along with the HECO QUIDS, will thereupon be distributed to the holders of the QUIPS. Thereafter, the MECO QUIDS and HELCO QUIDS shall be held by HECO as the record holder thereof, and the Subsidiary Guarantees will be released and discharged.
Subordination
In each Indenture, the applicable Company has covenanted and agreed thatpremium, if any, QUIDS issued thereunder will be subordinate and junior to all Senior Indebtedness of such Company to the extent provided in such Indenture. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt restructuring or similar proceedings in connection with any insolvency or bankruptcy proceeding of such Company, the holders of Senior Indebtedness of each such Company will first be entitled to receive payment in full of principal of and interest, if any, on such Senior Indebtedness before the Property Trustee, on behalf of the holders of the QUIPS (or, in the case of Distributable HECO QUIDS distributeddue and to the holders of the QUIPS, such holders), will be entitled to receive or retain any payment in respect of the principal of or interest, if any,become due on the QUIDS.
In the event of the acceleration of the maturity of any QUIDS of any of the Companies, the holders of all Senior Indebtedness of such Company outstanding at the time of such acceleration will first be entitled to receive payment in full of all amounts due thereon (including any amounts due upon acceleration) before the holders of such QUIDS will be entitled to receive or retain any payment in respect of the principal of or interest, if any, on such QUIDS.
No payments on account of principal or interest, if any, in respect of the QUIDS of any of the Companies may be made if there shall have occurred and be continuing a default in any payment with respect to Senior Indebtedness of such Company, or an event of default with respect to any such Senior Indebtedness resulting in the acceleration of the maturity thereof, or if any judicial proceeding shall be pending with respect to any such default.
“Indebtedness” means with respect to any person, whether recourse is to all or a portion of the assets of such person and whether or not contingent, (i) every obligation of such person for money borrowed; (ii) every obligation of such person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such person; (iv) every obligation of such person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such person; and (vi) every obligation of the type referred to in clauses (i) through (v) above of another person and all dividends of another person the payment of which, in either case, such person has guaranteed or is responsible or liable, directly or indirectly, as obligor or otherwise.
“Senior Indebtedness” means with respect to any of the Companies the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy
or for reorganization relating to such Company whether or not such claim for post-petition interest is allowed in such proceeding), on Indebtedness, whether incurred on orNotes prior to the dateMaturity thereof. For this purpose, Government Obligations include direct obligations of, or obligations unconditionally guaranteed by, the United States of America entitled to the benefit of the Indenture of such Companyfull faith and credit thereof and, subject to certain conditions, certificates, depositary receipts or thereafter incurred, unless,other instruments which evidence a direct ownership interest in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are not superioror in right of paymentany specific interest or principal payments due in respect thereof.
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CertainWells Fargo Bank, National Association, is one of the operating assetsunderwriters for this offering. HECO had undrawn lines of HECO and its consolidated subsidiaries are owned by MECO and HELCO. In addition, HECO receives interest and dividends from its subsidiaries. Accordingly, the HECO QUIDS and the Substituted HECO QUIDS will be effectively subordinated to all existing and future liabilities of HECO’s subsidiaries. Holders of Distributable HECO QUIDS should look only to the assets of HECO for payments of principal and interest thereon.
The Indentures place no limitation oncredit with Wells Fargo Bank, National Association in the amount of additional Senior Indebtedness that may be incurred by any$25 million as of December 31, 2005.
Governing Law
The Indenture and the QUIDSguarantees of HECO will be governed by and construed in accordance with, the internal laws of the State of New York.
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Information Concerning the Debenture Trustee
The Debenture Trustee shall have and be subject to all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act of 1939. Subject to such provisions, the Debenture Trustee is under no obligation to exercise any of the powers vested in it by the Indenture at the request of any holder of QUIDS, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The Debenture Trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Debenture Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it.
The Trust Guarantee will be executed and delivered by HECO upon the issuance by the Trust of its QUIPS for the benefit of the holders of the QUIPS. The Bank of New York will act as the Trust Guarantee Trustee under the Trust Guarantee for purposes of compliance with the Trust Indenture Act of 1939 and the Trust Guarantee will be qualified as an indenture under the Trust Indenture Act of 1939. The following is a summary of certain of the terms and provisions of the Trust Guarantee. This summary is not a complete description of all of the terms and provisions of the Trust Guarantee. For more information, we refer you to the form of the Trust Guarantee, which has been filed as an exhibit to the registration statement of which this prospectus forms a part. The Trust Guarantee Trustee will hold the Trust Guarantee for the benefit of the holders of the QUIPS.GeneralHECO will irrevocably agree to pay in full, on a subordinated basis, to the extent set forth herein, the Guarantee Payments (as defined below) to the holders of the QUIPS, as and when due, regardless of any defense, right of set-off or counterclaim that the Trust may have or assert, other than the defense of payment. The following payments with respect to the QUIPS, to the extent not paid by or on behalf of the Trust (the “Guarantee Payments”), will be subject to the Trust Guarantee: (i) any accumulated and unpaid Distributions required to be paid on such QUIPS, to the extent that the Trust has funds on hand available at such time, (ii) the QUIPS Redemption Price with respect to any QUIPS called for redemption, to the extent the Trust has funds on hand available at such time, or (iii) upon a voluntary or involuntary dissolution, winding up or liquidation of the Trust (unless the Distributable HECO QUIDS are distributed to holders of QUIPS), the lesser of (a) the Liquidation Distribution and (b) the amount of assets of the Trust remaining available for distribution to holders of QUIPS. HECO’s obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by HECO to the holders of the QUIPS or by causing the Trust to pay such amounts to such holders.The Trust Guarantee will be an irrevocable guarantee on a subordinated basis of the Trust’s obligations under the QUIPS, but will apply only to the extent that the Trust has funds sufficient to make such payments, and is not a guarantee of collection.If any of the Companies do not make interest payments on the QUIDS held by the Trust, the Trust will not be able to pay Distributions on the QUIPS and will not have funds legally available to make these payments. The Trust Guarantee will rank subordinate and junior in right of payment to all Senior Indebtedness of HECO. See “—Status of the Trust Guarantee.” Certain of the operating assets of HECO and its consolidated subsidiaries are owned by MECO and HELCO. In addition, HECO receives interest and dividends from its subsidiaries. Accordingly, HECO’s obligations under the Trust Guarantee will be effectively subordinated to all existing and future liabilities of HECO’s subsidiaries, and claimants should look only to the assets of HECO for payments thereunder.Status of the Trust GuaranteeThe Trust Guarantee will constitute an unsecured obligation of HECO and will rank junior in right of payment to all Senior Indebtedness of HECO.The Trust Guarantee will rank equally with the guarantees issued with respect to trust preferred securities issued by HECO Capital Trust I and HECO Capital Trust II in 1997 and 1998, respectively, until such trust preferred securities are redeemed, and all similar guarantees issued by HECO in the future. The Trust Guarantee will constitute a guarantee of payment and not of collection (i.e., the guaranteed party may institute a legal proceeding directly against HECO to enforce its rights under the Trust Guarantee without first instituting a legal proceeding against any other person or entity). The Trust Guarantee will be held for the benefit of the holders of the QUIPS. The Trust Guarantee will not be discharged except by payment of the Guarantee Payments in full to the extent not paid by the Trustor upon distribution to the holders of the QUIPS of the Distributable HECO QUIDS. The Trust Guarantee does not place a limitation on the amount of additional Senior Indebtedness that may be incurred or issued by any of the Companies. The electric public utility business is capital intensive and for this and other reasons the Companies anticipate that from time to time they will incur substantial additional indebtedness constituting Senior Indebtedness.Amendments and AssignmentExcept with respect to any changes which do not materially adversely affect the rights of holders of the QUIPS (in which case no vote will be required), the Trust Guarantee may not be amended without the prior approval of the holders of a majority of the aggregate liquidation preference of the outstanding QUIPS. The manner of obtaining any such approval will be as set forth under “Description of QUIPS—Voting Rights; Amendment of the Trust Agreement.” All guarantees and agreements contained in the Trust Guarantee shall bind the successors, assigns, receivers, trustees and representatives of HECO and shall inure to the benefit of the holders of the related QUIPS then outstanding.Events of DefaultAn event of default under the Trust Guarantee will occur upon the failure of HECO to perform any of its payment or other obligations thereunder. The holders of a majority in aggregate liquidation preference of the QUIPS have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trust Guarantee Trustee in respect of the Trust Guarantee or to direct the exercise of any trust or power conferred upon the Trust Guarantee Trustee under the Trust Guarantee.Any holder of the QUIPS may institute a legal proceeding directly against HECO to enforce its rights under the Trust Guarantee without first instituting a legal proceeding against the Trust, the Trust Guarantee Trustee or any other person or entity.HECO, as guarantor, is required to file annually with the Trust Guarantee Trustee a certificate as to whether or not HECO is in compliance with all the conditions and covenants applicable to it under the Trust Guarantee.Information Concerning the Guarantee TrusteeThe Trust Guarantee Trustee, other than during the occurrence and continuance of a default by HECO in performance of the Trust Guarantee, undertakes to perform only such duties as are specifically set forth in the Trust Guarantee and, after a default with respect to the Trust Guarantee, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the Trust Guarantee Trustee is under no obligation to exercise any of the powers vested in it by the Trust Guarantee at the request of any holder of any QUIPS unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby.Termination of the Trust GuaranteeThe Trust Guarantee will terminate and be of no further force and effect upon full payment of the QUIPS Redemption Price, upon full payment of the amounts payable upon liquidation of the Trust or upon distribution of the Distributable HECO QUIDS to the holders of the QUIPS. The Trust Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of QUIPS must restore payment of any sums paid under such QUIPS or the Trust Guarantee.Governing LawThe Trust Guarantee will be governed by, and construed in accordance with, the internal laws of the State of New York.DESCRIPTION OF SUBSIDIARY GUARANTEES AND EXPENSE AGREEMENTThe Subsidiary Guarantees of HECO will be included in the respective Indentures of MECO and HELCO. will also execute and deliver the Expense Agreement. The following is a summary of certain of the terms and provisions of the Subsidiary Guarantees and the Expense Agreement. The summary is not a complete description of all of the terms and provisions of the Subsidiary Guarantees and the Expense Agreement. For more information, we refer you to the applicable portions of the forms of the subsidiary Junior Indenture and the Expense Agreement, each of which has been filed as an exhibit to the registration statement of which this prospectus forms a part.The Subsidiary GuaranteesThe MECO Indenture and the HELCO Indenture will each include a full, unconditional and irrevocable HECO guarantee, on a subordinated basis, of all payments in respect of the MECO QUIDS and the HELCO QUIDS. The Subsidiary Guarantees do not require HECO to pay any interest payments deferred by MECO or HELCO during a valid Extension Period. The Subsidiary Guarantees will be enforceable regardless of any defense, right of set-off or counterclaim that HECO may have or assert.HECO’s obligations under the Subsidiary Guarantees will constitute unsecured obligations of HECO and will rank junior to all other existing and future liabilities of HECO and will rank equally with any guarantee now or hereafter entered into by HECO in respect of any securities similar to the MECO QUIDS and HELCO QUIDS issued by any subsidiary of HECO. Accordingly, the rights of the holders of MECO QUIDS and HELCO QUIDS to receive payments under the Subsidiary Guarantees will be subject to the rights of the holders of any obligations that are senior in priority to the obligations under the Subsidiary Guarantees. Furthermore, the holders of HECO obligations that rank senior to the obligations under the Subsidiary Guarantees (including, but not limited to, obligations constituting Senior Indebtedness of HECO) will be entitled to the same rights upon payment default or dissolution, liquidation and reorganization in respect of the Subsidiary Guarantees that inure to the holders of Senior Indebtedness of HECO as against the holders of HECO QUIDS. The terms of the MECO QUIDS and HELCO QUIDS provide that each holder, by acceptance thereof, agrees to the subordination provisions and other terms of the Subsidiary Guarantees.Each of the Subsidiary Guarantees will terminate and be of no further force or effect upon payment in full of the QUIDS Redemption Price of the MECO QUIDS and the HELCO QUIDS, respectively, upon payment in full of the QUIPS Redemption Price or upon payment in full of the amounts payable upon liquidation of the Trust or upon distribution of the Distributable HECO QUIDS to the holders of the QUIPS; provided, however, that each of the Subsidiary Guarantees will continue to be effective or will be reinstated, as the case may be, if at any time any holder of QUIPS or Distributable HECO QUIDS must restore payment of any sums paid under the QUIPS, the Distributable HECO QUIDS or the applicable Subsidiary Guarantee.The Expense AgreementIn the Expense Agreement that will be entered into by each of the Companies, the Companies will agree to provide funds to the Trust as needed to pay to each person or entity to whom the Trust becomes indebted or liable, the full payment of any costs, expenses or liabilities of the Trust, other than obligations of the Trust to pay to the holders of any QUIPS the amounts due such holders pursuant to the terms of the QUIPS. Each Company will be obligated to contribute its share of any such payments pro rata based on the aggregate principal amount of its respective QUIDS, and HECO will fully, irrevocably and unconditionally agree to pay the amounts owed by MECO and HELCO under the Expense Agreement if either or both of them fail to make such payments when due.RELATIONSHIP AMONG THE QUIPS, THE QUIDS AND THE GUARANTEESFull and Unconditional GuaranteeTaken together, HECO’s obligations under the HECO QUIDS, the HECO Indenture, the Subsidiary Guarantees, the Trust Agreement, the Expense Agreement and the Trust Guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee of payments of distributions and other amounts due on the QUIPS. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes such guarantee. It is only the combined operation of these documents that has the effect of providing a full, irrevocable and unconditional guarantee of the Trust’s obligations under the QUIPS. Payments of Distributions and other amounts due on the QUIPS (to the extent the Trust has funds available for the payment of such Distributions and other amounts) are irrevocably guaranteed by HECO as and to the extent set forth under “Description of Trust Guarantee.” If and to the extent that HECO does not make payments on the HECO QUIDS, or if MECO or HELCO does not make payments on the MECO QUIDS or the HELCO QUIDS, as the case may be, and HECO does not make payments under the Subsidiary Guarantees, the Trust will not have sufficient funds to pay Distributions or other amounts due on the QUIPS. The Trust Guarantee does not cover payment of Distributions when the Trust does not have sufficient funds to pay such Distributions. In such event, a holder of QUIPS may institute a Direct Action against any of the Companies which has failed to make payment, and against HECO on its Subsidiary Guarantees if MECO or HELCO has failed to make payment, to enforce payment of such Distributions to such holder after the respective due dates. The obligations of HECO under the HECO QUIDS, the Trust Guarantee and the Expense Agreement are subordinate and junior to all Senior Indebtedness of HECO and the obligations of HECO under the Subsidiary Guarantees are subordinate and junior to all existing and future liabilities of HECO (including Senior Indebtedness).Sufficiency of PaymentsAs long as payments of interest and other payments are made when due on the QUIDS, such payments will be sufficient to cover Distributions and other payments to be made on the QUIPS, primarily because (i) the aggregate principal amount of the QUIDS will be equal to the sum of the aggregate stated liquidation preference of the QUIPS and the Common Securities; (ii) the interest rate and interest and other payment dates on the QUIDS will match the Distribution rate and Distribution and other payment dates for the QUIPS; (iii) the Companies shall pay under the Expense Agreement for all and any costs, expenses and liabilities of the Trust except the Trust’s obligations to holders of the QUIPS under the QUIPS; and (iv) the Trust Agreement further provides that the Trust will not engage in any activity that is not consistent with the limited purposes of the Trust.Enforcement Rights of Holders of QUIPSA holder of any QUIPS may institute a legal proceeding directly against HECO to enforce its rights under the Trust Guarantee without first instituting a legal proceeding against the Trust Guarantee Trustee, the Trust or any other person or entity. See “Description of QUIPS—Enforcement of Certain Rights by Holders of QUIPS” for a description of the enforcement rights of holders of QUIPS under the Trust Agreement.A default or event of default under any Senior Indebtedness of any of the Companies will not constitute a default or Event of Default under the Indenture of such Company. However, in the event of payment defaults under, or acceleration of, Senior Indebtedness of such Company, the subordination provisions of each Indenture provide that no payments may be made in respect of the QUIDS issued thereunder until such Senior Indebtedness has been paid in full or any payment default thereunder has been cured or waived. Failure to make required payments on any such QUIDS would constitute an Event of Default under such Indenture.Limited Purpose of TrustThe QUIPS evidence preferred undivided beneficial interests in the assets of the Trust, and the Trust exists for the sole purpose of issuing the QUIPS and the Common Securities and investing the proceeds thereof in QUIDS. A principal difference between the rights of a holder of QUIPS and a holder of QUIDS is that a holder of QUIDS is entitled to receive from the applicable Company (or from HECO under the Subsidiary Guarantees) the principal amount of and interest accrued on QUIDS held, while a holder of QUIPS is entitled to receive Distributions from the Trust (or from HECO under the Trust Guarantee) if and to the extent the Trust has funds available for the payment of such Distributions.Rights Upon DissolutionUpon any voluntary or involuntary dissolution, winding-up or liquidation of the Trust not involving a distribution of the Distributable HECO QUIDS, the holders of the QUIPS will be entitled to receive, out of assets held by the Trust after satisfaction of creditors of the Trust as provided by applicable law, the Liquidation Distribution in cash. See “Description of QUIPS—Liquidation Value; Liquidation Distribution Upon Dissolution.” Upon any voluntary or involuntary liquidation or bankruptcy of any of the Companies, the Property Trustee, as holder of the QUIDS of such Company, would be a subordinated creditor of such Company, subordinated in right of payment to all Senior Indebtedness of such Company, but entitled to receive payment in full of principal and interest before any stockholders of such Company receive payments or distributions. Since HECO is the guarantor under the Trust Guarantee and the Subsidiary Guarantees and is obligated (either directly or as guarantor) under the Expense Agreement to pay for all costs, expenses and liabilities of the Trust (other than the Trust’s obligations to the holders of the QUIPS), the positions of a holder of QUIPS and a holder of QUIDS relative to other creditors and to stockholders of HECO in the event of liquidation or bankruptcy of HECO would be substantially the same.CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCESThe following is a summary of the material United States federal income tax consequences of the purchase, ownership and disposition of QUIPS. This summary only addresses the tax consequences to a holder that acquires QUIPS on their original issue date at their original offering price, that holds the QUIPS as a capital asset for tax purposes and, except as otherwise expressly provided, that is (i) an individual citizen or resident of the United States, (ii) a corporation or partnership organized in or under the laws of the United States or any state thereof or the District of Columbia, (iii) an estate the income of which is subject to United States federal income taxation regardless of its source or (iv) a trust the administration of which is subject to the primary supervision of a court within the United States and for which one or more United States persons have the authority to control all substantial decisions (a “United States Person”).This summary does not address all tax consequences that may be applicable to a United States Person that is a beneficial owner of QUIPS (a “U.S. Holder”), nor does it address the tax consequences to (i) persons that may be subject to special treatment under United States federal income tax law, such as banks, insurance companies, thrift institutions, regulated investment companies, real estate investment trusts, tax-exempt organizations, dealers in securities or currencies and traders in securities that elect to use a mark-to-mark method of accounting, (ii) persons that will hold QUIPS as part of a position in a “straddle” or as part of a “hedging,” “conversion” or other integrated investment transaction for federal income tax purposes, or (iii) persons whose functional currency is not the United States dollar.The statements of law and legal conclusions set forth in this summary constitute the opinion of Goodsill Anderson Quinn & Stifel LLP, counsel to the Companies and the Trust (“Tax Counsel”), which opinion is not binding on the Internal Revenue Service or the courts. This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, Treasury regulations, Internal Revenue Service rulings and pronouncements and court decisions now in effect, all of which are subject to change at any time. Such changes may be applied retroactively in a manner that could cause the tax consequences to vary substantially from the consequences described below, possibly adversely affecting a beneficial owner of QUIPS. If such a change occurs and constitutes a Tax Event, HECO will be permitted to cause a redemption of the QUIPS. The authorities on which this summary is based are subject to various interpretations and no rulings have been or will be sought from the Internal Revenue Service with respect to any of the tax matters discussed in this prospectus. It is therefore possible that the United States federal income tax treatment of the purchase, ownership and disposition of QUIPS may differ from the treatment described below.Please consult your own tax advisor as to the consequences of the purchase, ownership and disposition of QUIPS in light of your own particular circumstances under the Internal Revenue Code and the laws of any other taxing jurisdiction.Classification of the TrustTax Counsel is of the opinion that, under current law and assuming compliance with the terms of the Trust Agreement and certain other documents, the Trust will be classified as a grantor trust and not as an association taxable as a corporation for United States federal income tax purposes. As a result, each beneficial owner of QUIPS will be treated as owning an undivided beneficial interest in the QUIDS. Accordingly, each U.S. Holder will be required to include in its gross income its pro rata share of any interest or original issue discount (“OID”) paid or accrued with respect to the QUIDS whether or not the Trust actually distributes cash to holders. See “—Stated Interest and Original Issue Discount.”Stated Interest and Original Issue DiscountUnder applicable Treasury regulations, a “remote” contingency that stated interest will not be timely paid is ignored when determining whether a debt instrument is issued with OID. Under each ofthe Indentures, the applicable Company has the right to defer the payment of interest on its QUIDS at any time or from time to time for a period (including any extensions thereof) not exceeding 20 consecutive quarters with respect to each Extension Period, provided that no Extension Period may extend beyond the Stated Maturity of such QUIDS. Each of the Companies believes that the likelihood of it exercising its option to defer payments of interest is remote because exercising the option would, among other things, prevent such Company (and HECO, if the deferring Company is MECO or HELCO) from declaring dividends on its capital stock. Accordingly, Tax Counsel is of the opinion that the QUIDS should not be considered to be issued with OID at the time of their original issuance.Under the regulations, if any Company elects an Extension Period, such Company’s QUIDS would at that time be treated as having been retired and reissued with OID. Consequently, U.S. Holders (even if they used the cash method of accounting for United States federal income tax purposes) would be required to include OID in income on an economic accrual basis with respect to such QUIDS during such Extension Period and thereafter for as long as such QUIDS remain outstanding. In such event, all of a U.S. Holder’s taxable interest income with respect to those QUIDS would be accounted for as OID on an economic accrual basis regardless of such holder’s method of tax accounting, and actual distributions of stated interest on those QUIDS would not be reported as taxable income. Consequently, a U.S. Holder would be required to include OID in gross income even though the Companies would not make any actual cash payments on their QUIDS during the Extension Period. The amount of OID that would accrue in any quarterly period would approximately equal the amount of interest that accrues in that quarterly period at the stated interest rate. Stated interest on the QUIDS of any of the Companies with respect to which such Company had not exercised its right to defer payments of interest would continue to be taxable to a U.S. Holder at the time it was paid or accrued in accordance with such U.S. Holder’s method of accounting for United States federal income tax purposes.Because income on the QUIDS will constitute interest or OID, corporate U.S. Holders will not be entitled to dividends-received deductions with respect to any income taken into account with respect to the QUIPS. Moreover, the preferential tax rates applicable to corporate dividends will not apply to such interest or OID.Distribution of QUIDS to Holders of QUIPSTax Counsel is of the opinion that, under current United States federal income tax law, the exchange of the MECO QUIDS and the HELCO QUIDS for the Substituted HECO QUIDS would likely be treated as a taxable exchange for United States federal income tax purposes with respect to a U.S. Holder’s pro rata share of MECO QUIDS and HELCO QUIDS. As a result, each U.S. Holder would recognize gain or loss in an amount equal to the difference between (i) the fair market value of such U.S. Holder’s pro rata share of the Substituted HECO QUIDS received by the Trust in exchange for MECO QUIDS and HELCO QUIDS prior to such distribution and (ii) such U.S. Holder’s adjusted tax basis in its pro rata share of MECO QUIDS and HELCO QUIDS exchanged therefor. Tax Counsel is of the further opinion that, under current United States federal income tax law, the exchange would not be a taxable exchange with respect to a U.S. Holder’s pro rata share of HECO QUIDS and such U.S. Holder would not recognize any gain or loss with respect thereto. See “Description of QUIPS—Redemption or Exchange—Special Event Redemption or Distribution of QUIDS” and “Description of QUIDS—Distribution of QUIDS; Exchange of Substituted HECO QUIDS for MECO and HELCO QUIDS.”Upon the distribution of the Distributable HECO QUIDS to the holders, each holder would receive directly its pro rata share thereof previously held indirectly through the Trust and, with respect to such holder’s pro rata share of HECO QUIDS (but not Substituted HECO QUIDS), would have a holding period and aggregate adjusted tax basis equal to the holding period and aggregate adjusted tax basissuch holder had in its pro rata share of HECO QUIDS before such distribution. Tax Counsel is of the opinion that, under current United States federal income tax law, the distribution of the Distributable HECO QUIDS upon the dissolution of the Trust would not be a taxable exchange to holders of the QUIPS. If, however, the Trust were characterized for United States federal income tax purposes as an association taxable as a corporation at the time of dissolution, or if there were a change in law or legal interpretation, or upon the occurrence of certain other circumstances, the distribution of the Distributable HECO QUIDS could be a taxable exchange to holders of the QUIPS. See “Description of QUIPS—Redemption or Exchange—Special Event Redemption or Distribution of QUIDS” and “Description of QUIDS—Distribution of QUIDS; Exchange of Substituted HECO QUIDS for MECO and HELCO QUIDS.”Tax Counsel is of the opinion that, following such a distribution, a U.S. Holder would generally include in gross income interest in respect of the Distributable HECO QUIDS received in the manner described under “Stated Interest and Original Issue Discount,” except that the Substituted HECO QUIDS may be treated as having been issued either with OID or at a premium, depending on their fair market value at the time of the exchange and the U.S. Holder’s tax basis in the QUIPS at the time of the exchange. Issuance of the Distributable HECO QUIDS with OID or at a premium could significantly change the amounts of interest income included in gross income by a U.S. Holder in taxable years following the distribution, as well as the amount of any gain or loss recognized by a U.S. Holder upon a subsequent disposition of Distributable HECO QUIDS. It is not possible to predict the precise tax consequences to a U.S. Holder in this regard, and U.S. Holders should consult their own tax advisors as to such consequences. However, if the Substituted HECO QUIDS are treated as having been issued with OID, U.S. Holders (even if they use the cash method of accounting for United States federal income tax purposes) will be required to include OID in income on an economic accrual basis with respect to such Substituted HECO QUIDS.Sales or Redemption of QUIPSGain or loss will be recognized by a U.S. Holder on a sale of QUIPS (including a redemption for cash) in an amount equal to the difference between the amount realized (which, for this purpose, will exclude amounts attributable to accrued interest not previously included in income) and the U.S. Holder’s adjusted tax basis in the QUIPS sold or redeemed. The tax basis of a holder in its QUIPS would be increased by any OID included in income and decreased by any payments of interest that had been deferred. Gain or loss recognized by a U.S. Holder on QUIPS held for more than one year will generally be taxable as long-term capital gain or loss. Long-term capital gain of a non-corporate U.S. Holder is generally taxed at a maximum rate of 15%.The QUIPS may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the underlying QUIDS. A U.S. Holder that disposes of its QUIPS between record dates for payments of Distributions will nevertheless be required to include in income as ordinary income accrued OID and, in the case of an accrual method taxpayer, accrued but unpaid interest on the QUIDS through the date of disposition. Such U.S. Holder will recognize a capital loss on the disposition of its QUIPS to the extent the selling price (which may not fully reflect the value of accrued but unpaid interest) is less than the U.S. Holder’s adjusted tax basis in the QUIPS (which will reflect any accrued OID). Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for federal income tax purposes.United States Alien HoldersFor purposes of this discussion, a “United States Alien Holder” is a beneficial owner of QUIPS that is not a United States Person. Under present United States federal income tax laws: (i) payments by the Trust or any of its paying agents to any holder of QUIPS that is a United States Alien Holder will notbe subject to United States federal income or withholding tax, provided (a) the beneficial owner of the QUIPS does not actually or constructively own 10 percent or more of the total combined voting power of all classes of stock of HECO entitled to vote, (b) the beneficial owner of the QUIPS is not a controlled foreign corporation that is related to HECO through stock ownership, and (c) either (A) the beneficial owner of the QUIPS certifies to the issuer or its agent, under penalty of perjury, that it is not a United States Person and provides its name and address or (B) a securities clearing organization, bank or other financial institution that holds customers’ securities in the ordinary course of its trade or business (a “Financial Institution”), and holds the QUIPS in such capacity, certifies to the issuer or its agent, under penalty of perjury, that such statement has been received from the beneficial owner by it or by a Financial Institution between it and the beneficial owner and furnishes the Trust or its agent with a copy thereof; and (ii) a United States Alien Holder will generally not be subject to United States federal income or withholding tax on any gain realized upon the sale or other disposition of QUIPS, provided the gain is not effectively connected with the conduct of a trade or business in the United States by the United States Alien Holder and the United States Alien Holder is not an individual who has been present in the United States for 183 days or more during the year of the sale or other disposition.Backup Withholding Tax and Information ReportingThe amount of interest or OID paid or accrued on the QUIPS held of record by United States Persons (other than corporations and other exempt holders) will be reported annually to the Internal Revenue Service. It is anticipated that such interest or OID will be reported to holders on Form 1099INT or Form 1099OID and delivered by January 31 following each calendar year. “Backup” withholding at the applicable statutory rate will apply to payments of interest to non-exempt United States Persons unless the holder furnishes its taxpayer identification number in the manner prescribed in applicable Treasury regulations, certifies that such number is correct, certifies as to no loss of exemption from backup withholding and meets certain other conditions.Payment of the proceeds from the disposition of QUIPS to or through the United States office of a broker is subject to information reporting and backup withholding unless the Holder or beneficial owner establishes an exemption from information reporting and backup withholding.Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a holder’s United States federal income tax liability, provided the required information is furnished to the Internal Revenue Service.Each fiduciary of a pension, profit-sharing or other employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (each, an “ERISA Plan”), should consider the fiduciary standards of ERISA in the context of the ERISA Plan’s particular circumstances before authorizing an investment in the QUIPS. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the ERISA Plan.Section 406 of ERISA prohibits ERISA Plans, and Section 4975 of the Code prohibits other employee benefit plans that are not subject to ERISA but are subject to Section 4975 of the Code, such as individual retirement accounts and Keogh plans (together with ERISA Plans, “Plans”), from engaging in certain transactions involving “plan assets” with persons who are “parties in interest” under ERISA or “disqualified persons” under the Code (together, “Parties in Interest”) with respect to such Plan. A violation of these “prohibited transaction” rules may result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for such persons, unless exemptive relief is available under an applicable statutory or administrative exemption.Certain transactions involving the issuer could be deemed to constitute direct or indirect prohibited transactions under ERISA and Section 4975 of the Code with respect to a Plan if the QUIPS were acquired with “plan assets” of such Plan. For example, if HECO is a Party in Interest with respect to an investing Plan (either directly or by reason of its ownership of its subsidiaries), an indirect extension of credit prohibited by Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the Code between HECO and the investing Plan may be deemed to occur, unless exemptive relief were available under an applicable administrative exemption (see below).The Department of Labor (“DOL”) has issued prohibited transaction class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions resulting from the purchase or holding of the QUIPS, assuming that assets of the Trust were deemed to be “plan assets” of Plans investing in the Issuer. Those class exemptions include PTCE 96-23 (for certain transactions determined by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company pooled separate accounts), and PTCE 84-14 (for certain transactions determined by independent qualified asset managers).Any purchaser or holder of the QUIPS or any interest therein will be deemed to have represented by its purchase and holding thereof that it either (a) is not a Plan and is not purchasing such securities on behalf of or with “plan assets” of any Plan or (b) is eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another DOL exemption with respect to such purchase or holding.Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries of any Plan purchasing or holding the QUIPS, and each fiduciary for a governmental or church plan subject to rules similar to those imposed on Plans, consult with their legal counsel concerning an investment in the QUIPS and regarding the availability of possible exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another DOL exemption. In addition, each fiduciary for a governmental or church plan subject to rules similar to those imposed on Plans should consult with his or her legal counsel concerning the purchase or holding of the QUIPS under applicable state and/or local law.The Companies, the Trust and the underwriters for the offering named below have entered into an underwriting agreement with respect to the QUIPS.Notes. Subject to the terms andcertain conditions, of the underwriting agreement, each underwriter has severally agreed to purchase from the Trustrespective principal amount of the number of QUIPS indicatedHECO Notes, the HELCO Notes and the MECO Notes set forth opposite its name in the following table. Goldman, Sachs & Co.table:
| Principal | Principal | Principal | |||||||||||
| Amount of | Amount of | Amount of | |||||||||||
| Underwriters | HECO Notes | HELCO Notes | MECO Notes | ||||||||||
| Goldman, Sachs & Co. | $ | $ | $ | ||||||||||
| A.G. Edwards & Sons, Inc. | |||||||||||||
| Lehman Brothers Inc. | |||||||||||||
| Merrill Lynch, Pierce, Fenner & Smith Incorporated | |||||||||||||
| Wells Fargo Securities, LLC | |||||||||||||
| Total | $ | 100,000,000 | $ | 50,000,000 | $ | 15,000,000 | |||||||
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Because the Trust will invest the proceeds from the sale of the QUIPS in the QUIDS issued by the Companies, the underwriting agreement provides that the Companies will pay an underwriting commission of $ per QUIPS (or $ for all of the QUIPS) to the underwriters, as compensation.
QUIPSNotes being offered, if any are taken.
Prior to this offering, there has been no public market for the QUIPS. The QUIPS have been approved for listing on the New York Stock Exchange, subject to official notice of issuance, and HECO expects trading of the QUIPS on the New York Stock Exchange to begin within the 30-day period after the initial delivery of the QUIPS. In order to meet one of the requirements for listing the QUIPS, the underwriters have undertaken to sell lots of 100 or more to a minimum of 400 beneficial owners.
The representatives of the underwriters have advised HECO that they intend to make a market in the QUIPS prior to the commencement of trading on the New York Stock Exchange. However, the representativesNotes but are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the QUIPS.
Notes.
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31
The Companies and the Trust$375,000.
Certain mattersreimbursement of Delaware law relating to the validityexpenses. Wells Fargo Securities, LLC, one of the QUIPS, the validityunderwriters, is an affiliate of the Trust Agreement and the creation of the Trust will be passed upon by Richards, Layton & Finger, P.A., special Delaware counsel to the Companies and the Trust.Trustee.
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2,000,000 Preferred Securities
HECO Capital Trust III
Income Preferred Securities,
Series 2004 (QUIPSSM)
(Liquidation Preference $25 per QUIPS)
Notes due 2036
as set forth herein,Unconditionally
Piper Jaffray
Representatives of the Underwriters
Filing Fee for Registration Statement Legal Fees and Expenses* Accounting Fees and Expenses* Blue Sky Fees and Expenses* Printing and Engraving Fees* Fees and Expenses of Registrars, Transfer Agents, Paying Agents and Trustees* Fees of rating agencies* Listing Fees* Miscellaneous* Total*Item 14. Other Expenses of Issuance and Distribution.The estimated expenses in connection with the issuance and distribution of the securities being registered, other than underwriters’ compensation, are: $ 8,090 175,000 60,000 5,000 65,000 15,000 95,000 30,000 26,910 $ 480,000 *EstimatedItem 14. Other Expenses of Issuances and Distribution* Item 15. Indemnification of Directors and Officers.
| Filing fee for registration statement | $ | 17,655 | |||
| Legal fees and expenses | 120,000 | ||||
| Fees of rating agencies | 125,000 | ||||
| Accounting fees and expenses | 65,000 | ||||
| Printing and engraving expenses | 30,000 | ||||
| Trustee fees and expenses** | 2,000 | ||||
| Blue sky fees and expenses | 7,500 | ||||
| Other | 7,845 | ||||
| Total | $ | 375,000 | |||
| * | All amounts other than the SEC filing fee are estimated. |
| ** | Does not include annual service fee. |
| Item 15. | Indemnification of Directors and Officers |
II-1
without a prior determination that inan officer or director acted in good faith or in the best interests of HEI, and without prior court approval provide for indemnification against expenses (including attorneys’ fees), judgments, fines and settlement amounts in connection with any action by or in the right of HEI.
II-1
The Trust Agreement
Item 16. Exhibits.
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| Exhibits |
| † 1 | — | Form of Underwriting Agreement | ||||
| † 4 | (a) | — | Form of Indenture, dated as of March 1, 2006, between HECO and Wells Fargo Bank, National Association, as Trustee | |||
| † 4 | (b) | — | Form of Indenture, dated as of March 1, 2006, among HELCO, HECO, as guarantor, and Wells Fargo Bank, National Association, as Trustee | |||
| † 4 | (c) | — | Form of Indenture, dated as of March 1, 2006, among MECO, HECO, as guarantor, and Wells Fargo Bank, National Association, as Trustee | |||
| † 4 | (d) | — | Form of Officers’ Certificate | |||
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Opinion of Goodsill Anderson Quinn & Stifel | ||||
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Opinion of Pillsbury Winthrop | ||||
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Computation of Ratio of Earnings to Fixed | ||||
| * | 23 | |||
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Consent of KPMG | ||||
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— | Consent of Goodsill Anderson Quinn & Stifel LLP | |||
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Consent of Pillsbury Winthrop Shaw Pittman LLP | ||||
| * | 24 | |||
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Power of Attorney for HECO | ||||
| * | 24 | |||
— | Power of Attorney for | |||
| * | 24 | |||
— | Power of Attorney for MECO | |||
| * | 25 | |||
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Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of | ||||
| * | 25 | |||
— | Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of | |||
| * | 25 | |||
— | Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of | |||
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| Item 17. | Undertakings |
Item 17. Undertakings.
(1) That,undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of HECO’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this Registration Statementthe registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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(2) To provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
(3) That, for the purposes of determining any liability under the Securities Act of 1933:
(i) The information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) under the Securities Act shall be deemed to be part of this Registration Statement as
| (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. |
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(ii) Each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
| (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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SIGNATURES
Hawaiian Electric Company, Inc.each Registrant certifies that it has reasonable grounds to believe that Itit meets all of the requirements for filing onForm S-3, reasonably believes that the securities rating requirement contained in Transaction Requirement B.2 ofForm S-3 will be met by the time of the sale of the securities registered hereunder, and has duly caused this Amendment No. 2 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City and County of Honolulu, State of Hawaii, on the 9th20th day of March 2004.January, 2006.HAWAIIAN ELECTRIC COMPANY, INC. HAWAII ELECTRIC LIGHT COMPANY, INC. MAUI ELECTRIC COMPANY, LIMITED By /s/ HAWAIIAN ELECTRIC COMPANY, INC.Tayne S.Y. SekimuraBy:/s/ RICHARD A.VON GNECHTEN Richard A. von Gnechten Tayne S.Y. Sekimura Financial Vice President
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| Signatures | Title | Date | ||||
| Robert F. Clarke* Robert F. Clarke | Chairman | January 20, 2006 | ||||
| T. Michael May* T. Michael May | President and Chief Executive Officer and Director (Principal Executive Officer) | January 20, 2006 | ||||
| Tayne S.Y. Sekimura* Tayne S.Y. Sekimura | Financial Vice President (Principal Financial Officer) | January 20, 2006 | ||||
| Patsy H. Nanbu* Patsy H. Nanbu | Controller (Principal Accounting Officer) | January 20, 2006 | ||||
| Thomas B. Fargo* Thomas B. Fargo | Director | January 20, 2006 | ||||
| Timothy E. Johns* Timothy E. Johns | Director | January 20, 2006 | ||||
| A. Maurice Myers* A. Maurice Myers | Director | January 20, 2006 | ||||
| David M. Nakada* David M. Nakada | Director | January 20, 2006 | ||||
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| Signatures | Title | Date | ||||
| Diane J. Plotts* Diane J. Plotts | Director | January 20, 2006 | ||||
| Crystal K. Rose* Crystal K. Rose | Director | January 20, 2006 | ||||
| James K. Scott* James K. Scott | Director | January 20, 2006 | ||||
| Anne M. Takabuki* Anne M. Takabuki | Director | January 20, 2006 | ||||
| Kelvin H. Taketa* Kelvin H. Taketa | Director | January 20, 2006 | ||||
| Barry K. Taniguchi* Barry K. Taniguchi | Director | January 20, 2006 | ||||
| Jeffrey N. Watanabe* Jeffrey N. Watanabe | Director | January 20, 2006 | ||||
| *By | /s/Tayne S.Y. Sekimura Tayne S.Y. Sekimura For for the above mentioned officers and directors | |||||
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Hawaii Electric Light Company, Inc. has duly caused this Amendment No. 2 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, In the City and County of Honolulu, State of Hawaii, on the 9th day of March, 2004.
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Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2 to Registration Statement has been signed below by the following persons in their capacities with Hawaii Electric Light Company, Inc. and on the dates indicated.
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| T. Michael May* T. Michael May | Chairman | January 20, 2006 | ||||
| Robert F. Clarke* Robert F. Clarke | Director | January 20, 2006 | ||||
| Warren H. W. Lee* Warren H. W. Lee | President and Director (Principal Executive Officer) | January 20, 2006 | ||||
| Tayne S.Y. Sekimura* Tayne S.Y. Sekimura | Financial Vice President (Principal Financial Officer and Principal Accounting Officer) | January 20, 2006 | ||||
| *By | Tayne S.Y. Sekimura For herself and as Attorney-in-fact for the above mentioned officers and directors | |||||
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Maui Electric Company, Limited has duly caused this Amendment No. 2 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City and County of Honolulu, State of Hawaii, on the 9th day of March, 2004.
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Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2 to Registration Statement has been signed below by the following persons in their capacities with Maui Electric Company, Limited and on the dates indicated.
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| Title | Date | |||||||||
| T. Michael May* T. Michael May | Chairman | January 20, 2006 | ||||||||
| Robert F. Clarke* Robert F. Clarke | Director | January 20, 2006 | ||||||||
| Edward L. Reinhardt* Edward L. Reinhardt | President and Director (Principal Executive Officer) | January 20, 2006 | ||||||||
| Tayne S.Y. Sekimura* Tayne S.Y. Sekimura | Financial Vice President (Principal Financial Officer and Principal Accounting Officer) | January 20, 2006 | ||||||||
| *By | /s/Tayne S.Y. Sekimura Tayne S.Y. Sekimura For for the above mentioned officers and directors | |||||||||
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, HECO Capital Trust III has duly caused this Amendment No. 2 to Registration Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Honolulu, State of Hawaii, on March 9, 2004.
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EXHIBIT INDEX
| ||||||
| † | 1 | — | Form of Underwriting Agreement | |||
| † | 4 | |||||
— | Form of Indenture, dated as of March 1, 2006, between HECO and Wells Fargo Bank, National Association, as Trustee | |||||
| † | 4 | (b) | — | Form of Indenture, dated as of March 1, 2006, among HELCO, HECO, as guarantor, and Wells Fargo Bank, National Association, as Trustee | ||
| † | 4 | (c) | — | Form of Indenture, dated as of March 1, 2006, among MECO, HECO, as guarantor, and Wells Fargo Bank, National Association, as Trustee | ||
| † | 4 | (d) | — | Form of Officers’ Certificate | ||
| † | 4 | |||||
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Form of | ||||||
| † | 4 | |||||
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Form of | ||||||
| † | 5 | |||||
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Opinion of Goodsill Anderson Quinn & Stifel | ||||||
| † | 5 | |||||
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Opinion of Pillsbury Winthrop | ||||||
| * | ||||||
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Computation of Ratio of Earnings to Fixed | ||||||
| * | 23 | |||||
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Consent of KPMG | ||||||
| † | 23 | |||||
— | Consent of Goodsill Anderson Quinn & Stifel LLP | |||||
| † | 23 | |||||
— | Consent of | |||||
| * | 24 | |||||
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Power of Attorney for HECO | ||||||
| * | 24 | |||||
— | Power of Attorney for | |||||
| * | 24 | |||||
— | Power of Attorney for MECO | |||||
| * | 25 | |||||
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Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of | ||||||
| * | 25 | |||||
— | Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of | |||||
| * | 25 | |||||
— | Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of | |||||
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