e424b5
The information
in this preliminary prospectus supplement is not complete and
may be changed. This preliminary prospectus supplement and the
accompanying prospectus are not an offer to sell the notes and
they are not soliciting an offer to buy the notes in any
jurisdiction where the offer or sale is not permitted.
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Subject to Completion, dated
March 2, 2011
Filed
Pursuant to Rule 424(b)(5)
Registration
No. 333-172558
PRELIMINARY PROSPECTUS SUPPLEMENT
(To prospectus dated March 2, 2011)
$250,000,000
% Senior
Notes due 2021
We are offering $250,000,000 aggregate principal amount of
our % Senior Notes due 2021
(the notes).
We will pay interest on the notes
on
and
of each year, beginning
on ,
2011. The notes will be issued only in registered form in
minimum denominations of $2,000 and integral multiples of $1,000
above that amount.
The notes will mature
on ,
2021. We may redeem some or all of the notes at our option at
any time and from time to time at the make-whole
redemption price described in this prospectus supplement under
Description of the Notes Optional
Redemption.
The notes will be our senior unsecured obligations and will rank
senior in right of payment to our existing and future
indebtedness that is expressly subordinated in right of payment
to the notes; equal in right of payment to our existing and
future unsecured indebtedness that is not so subordinated;
junior in right of payment to any of our secured indebtedness to
the extent of the value of the assets securing such
indebtedness; and structurally junior to all existing and future
indebtedness and liabilities incurred by our subsidiaries.
The notes will not be listed on any securities exchange.
Currently, there is no public market for the notes.
Concurrent with the offering of notes pursuant to this
prospectus supplement, we are also offering by a separate
prospectus supplement $250,000,000 aggregate principal amount
of % Convertible Senior Notes
due 2018. Neither offering is conditioned on the other.
Investing in the notes involves risks. See Risk
Factors beginning on
page S-7
of this prospectus supplement and the risk factors incorporated
by reference in this prospectus supplement and the accompanying
prospectus, including those appearing in the Risk
Factors section of our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010.
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Per Note
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Total
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Public offering price(1)
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%
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$
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Underwriting discount
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%
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$
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Proceeds, before expenses, to us
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%
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$
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Plus accrued interest from March , 2011, if
settlement occurs after that date. |
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
The underwriters expect to deliver the notes to purchasers
through the book-entry delivery system of The Depository
Trust Company and its direct and indirect participants,
including Euroclear Bank S.A./N.V. and Clearstream Banking,
société anonyme, on or about March ,
2011.
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Morgan
Stanley |
UBS Investment Bank |
The date of this prospectus supplement is
March , 2011.
ABOUT
THIS PROSPECTUS SUPPLEMENT
This prospectus supplement and the accompanying prospectus
contain information about Old Republic International Corporation
and about the notes. They also refer to information contained in
other documents filed by us with the Securities and Exchange
Commission and incorporated into this document by reference.
References to this prospectus supplement or the prospectus also
include the information contained in such other documents. To
the extent that information appearing in a later filed document
is inconsistent with prior information, the later statement will
control. If this prospectus supplement is inconsistent with the
prospectus, you should rely on this prospectus supplement.
We have not authorized anyone to provide you with information
that is different from, or additional to, the information
provided in this prospectus supplement and the accompanying
prospectus or in any free writing prospectus filed with the
Securities and Exchange Commission. We are not making an offer
of these securities in any jurisdiction where the offer is not
permitted.
TABLE OF
CONTENTS
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Prospectus Supplement
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S-ii
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S-ii
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S-1
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S-7
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S-10
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S-11
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S-12
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S-23
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S-26
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S-30
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Prospectus
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About this Prospectus
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1
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Old Republic International Corporation
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1
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Risk Factors
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2
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Forward-Looking Statements
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2
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Use of Proceeds
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3
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Ratio of Earnings to Fixed Charges
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3
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Description of Debt Securities
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Plan of Distribution
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Legal Matters
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Experts
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Where You Can Find More Information
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Incorporation by Reference
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S-i
INCORPORATION
BY REFERENCE
The Securities and Exchange Commission allows us to
incorporate by reference into this prospectus
supplement and the accompanying prospectus the information we
file with it, which means that we can disclose important
information to you by referring you to those documents. The
information incorporated by reference is considered to be part
of this prospectus, and later information that we file with the
Securities and Exchange Commission will automatically update and
supersede this information. We incorporate by reference the
documents listed below and any future filings made with the
Securities and Exchange Commission under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (other
than any portions of such filings that are furnished rather than
filed under applicable Securities and Exchange Commission rules)
until our offering is completed:
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Our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010, filed on
February 28, 2011; and
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The sections of our Definitive Proxy Statement for the 2010
Annual Meeting of Shareholders filed with the SEC on
April 13, 2010 that are incorporated by reference in our
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009.
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You may request a copy of these filings at no cost by writing to
or telephoning us at the following address:
Old Republic International Corporation
307 North Michigan Avenue
Chicago, Illinois 60601
Telephone:
(312) 346-8100
Attention: Corporate Secretary
FORWARD-LOOKING
STATEMENTS
This prospectus supplement and any documents incorporated by
reference contain a number of forward-looking statements which
relate to anticipated future events rather than actual present
conditions or historical events. You can identify
forward-looking statements because generally they include words
such as may, will, could,
would, should, expect,
plan, anticipate, intend,
believe, estimate, predict,
potential or continue or the negative of
those terms or other comparable terminology. Such statements are
based upon current expectations of Old Republic International
Corporation and speak only as of the date made. These statements
are subject to various risks and uncertainties and other factors
that could cause results to differ from those set forth in the
forward-looking statements. With regard to Old Republics
General Insurance segment, its results can be affected, in
particular, by the level of market competition, which is
typically a function of available capital and expected returns
on such capital among competitors, the levels of interest and
inflation rates, and periodic changes in claim frequency and
severity patterns caused by natural disasters, weather
conditions, accidents, illnesses, work-related injuries, and
unanticipated external events. Mortgage Guaranty and
Title Insurance results can be affected by similar factors
and by changes in national and regional housing demand and
values, the availability and cost of mortgage loans, employment
trends, and default rates on mortgage loans. Mortgage Guaranty
results, in particular, may also be affected by various
risk-sharing arrangements with business producers, as well as
the risk management and pricing policies of government sponsored
enterprises. Life and health insurance earnings can be affected
by the levels of employment and consumer spending, variations in
mortality and health trends, and changes in policy lapsation
rates. At the parent holding company level, operating earnings
or losses are generally reflective of the amount of debt
outstanding and its cost, interest income on temporary holdings
of short-term investments, and
period-to-period
variations in the costs of administering the Companys
widespread operations. A more detailed discussion of all the
foregoing risks appears in Part I, Item 1A
Risk Factors, of the Companys 2010
Form 10-K,
which is specifically incorporated herein by reference.
All forward-looking statements address matters that involve
risks and uncertainties. Accordingly, there are or will be
important factors that could cause actual results to differ
materially from those indicated in these statements. None of Old
Republic International Corporation or its subsidiaries have a
duty to update any of the forward-looking statements after the
date of this prospectus supplement to conform them to actual
results except as otherwise required by law.
S-ii
SUMMARY
The following summary may not contain all of the information
that is important to you. You should read the following summary
together with more detailed information regarding us and the
notes being sold in this offering and our financial statements
and notes thereto which are incorporated by reference in this
prospectus supplement and the accompanying prospectus. A more
detailed discussion of our business appears in the reports we
file with the SEC which are incorporated herein by reference,
including in our 2010
Form 10-K
and in our subsequently filed Quarterly Reports on
Form 10-Q.
See Where You Can Find More Information in the
accompanying prospectus. In this prospectus supplement, unless
stated otherwise or the context otherwise requires, the terms
Old Republic, our company, the
Company, we, us, and
our refer to Old Republic International Corporation
and its consolidated subsidiaries.
The
Company
Overview
Old Republic International Corporation is a Chicago based
holding company engaged in the single business of insurance
underwriting. It conducts its operations through a number of
regulated insurance company subsidiaries organized into three
major segments, namely, its General (property and liability
insurance), Mortgage Guaranty, and Title Insurance Groups.
The Company also operates a small life and health insurance
business. In particular, our subsidiaries provide specialty
insurance programs to the transportation, commercial
construction, forest products, energy, general manufacturing,
and housing industries.
The insurance business is distinguished from most others in that
the prices (premiums) charged for various insurance products are
set without certainty of the ultimate benefit and claim costs
that will emerge or be incurred, often many years after issuance
of a policy. Our business is a long-term undertaking which is
managed with a primary focus on the achievement of favorable
underwriting results over time. In addition to operating income
from basic underwriting and related services functions,
significant investment income is earned from investable funds
generated by those functions and from shareholders
capital. In managing investable funds we endeavor to assure
stability of income from interest and dividends, protection of
capital, and sufficient liquidity to meet insurance underwriting
and other obligations as they become payable in the future.
Securities trading and the realization of capital gains are not
objectives. We believe our investment philosophy is best
categorized as emphasizing value, credit quality, and relatively
long-term holding periods. Our ability to hold both fixed
maturity and equity securities for long periods of time is
enabled by the scheduling of maturities in contemplation of an
appropriate matching of assets and liabilities.
Business
Segments
Our principal operations are in three business segments: General
Insurance Group, Mortgage Guaranty Group and
Title Insurance Group, with lesser operations in a
fourth Corporate and Other Operations.
General Insurance Group ($2,074 million or 52% of our
fiscal 2010 operating revenues). Our General
Insurance Group, through its subsidiaries, assumes risks and
provides related risk management services that encompass a large
variety of property and liability insurance coverages. Our
coverage does not include a significant exposure to personal
lines of insurance, such as homeowners and private automobile
coverages, and does not insure significant amounts of commercial
buildings and related property. General Insurance is primarily
sold through our independent agency and brokerage channels
(approximately 86% of our fiscal 2010 premiums). Additionally,
approximately 14% of premiums during fiscal 2010 were sold
directly through our production facilities.
We primarily focus on liability coverage underwritten for
businesses and public entities in the following classes:
commercial automobile (trucks) full coverage protection,
workers compensation and general liability (including
general liability portion of commercial package policies).
Within these insurance classes we focus on a number of
industries, most prominently the transportation (trucking and
general aviation), commercial construction, forest products and
energy industries.
S-1
Our diversification has been achieved through a combination of
internal growth initiatives, establishing new subsidiaries and
through selective acquisitions. For fiscal 2010, the breakdown
of insurance premiums within the General Insurance Group was as
follows: approximately 33.1% commercial automobile direct
insurance, approximately 21.6% workers compensation direct
insurance, approximately 11.9% general liability insurance and
approximately 33.4% other insurance.
Among other liability coverages, we indemnify corporations
financial exposures to directors and officers
(D&O) liability, as well as provide errors and
omissions (E&O) liability insurance. For over
twenty-five years we have been a provider of aviation insurance,
including coverage for hull and liability exposures, as well as
additional areas such as airports and flight schools.
We have a property insurance business that underwrites
commercial physical damage insurance on trucking risks. A very
small portion of this business is comprised of fire and other
physical perils for commercial properties. In addition to
D&O and E&O financial indemnity coverages, we cover
fidelity, surety and credit exposures for a wide range of
business enterprises. Fidelity and surety policies are issued
through independent agents by the Old Republic Surety Company.
Surety bonds, such as those covering public officials, license
and permit authorizations and contract bonds covering both
public and private works, are typically written for exposures of
less than $500,000. Fidelity bonds are also extended to small to
medium-sized risks. Old Republic Insured Credit Services, Inc.
has underwritten loan and retail installment sales credit
indemnity insurance since 1955 through commercial banks, thrifts
and other lending institutions. This coverage provides a limited
indemnity to lenders on a variety of consumer loans and
installment sales contracts.
Extended warranty coverages for new and used automobiles, as
well as home warranty policies covering appliances and other
mechanical systems in pre-owned homes are marketed by us through
our own employees and selected independent agents. Travel
insurance is produced through independent travel agents in the
U.S. and Canada. The coverages provided under these
policies, some of which are also underwritten by one of our life
insurance subsidiaries, include trip delay and trip cancellation
protection for insureds.
Mortgage Guaranty Group ($588 million or 15% of our
fiscal 2010 operating revenues). Our Mortgage
Guaranty Group provides private mortgage insurance
(MI) to lenders and investors to protect against
default-related losses on residential mortgage loans made in the
U.S. to homebuyers who pay at closing from their own funds
less than 20% of the homes purchase price. We only insure
first mortgage loans, primarily on residential properties
incorporating one to four family dwellings.
There are two principal types of MI coverage:
primary and pool. Primary mortgage
insurance provides mortgage default protection on individual
loans and covers a stated percentage of the unpaid loan amount,
delinquent interest and certain expenses associated with the
default and subsequent foreclosure. To mitigate losses we may
pay the entire claim amount, take title to the mortgaged
property and subsequently sell the property in lieu of paying
only the stated coverage percentage. Pool insurance is generally
used as a credit enhancement for secondary market mortgage
transactions. The coverage range is up to 100% of the net loss
on each individual loan included in the pool, subject to
deductible provisions, caps on individual exposures and
aggregate stop loss provisions which limit the aggregate losses
to a specified percentage of the total origination balances of
all the loans in the pool.
Traditional primary insurance is issued on an individual loan
basis to mortgage bankers, brokers, commercial banks and savings
institutions through our network of self-managed underwriting
sites located throughout the United States. Traditional primary
loans are individually reviewed (except for loans insured under
delegated approval programs) and priced according to filed
premium rates. In underwriting traditional primary business, we
generally adhere to the underwriting guidelines published by the
Federal Home Loan Mortgage Corporation (FHLMC) or
the Federal National Mortgage Association (FNMA).
FHLMC and FNMA are purchasers of many of the loans we insure.
Delegated underwriting programs allow approved lenders to commit
on behalf of Old Republic to insure loans provided the loans
adhere to predetermined underwriting guidelines. In 2010,
delegated underwriting approvals accounted for approximately 57%
of our new traditional primary risk written.
S-2
Bulk and other insurance is issued on groups of loans to
mortgage banking customers through a centralized risk assessment
and underwriting department. These groups of loans are priced in
the aggregate, on a bid or negotiated basis. Insurance issued in
this manner can be provided through primary insurance policies
(loan level insurance) or pool insurance policies (aggregate
coverage). We consider bulk insurance to be exposed to higher
risk than those designated as other insurance.
Prior to insuring any loans we issue a master policy to each
approved customer outlining the terms and conditions under which
the coverage will be provided. Primary business is executed via
the issuance of a commitment/certificate for each loan submitted
and approved for insurance. A separate pool coverage insurance
policy is issued covering the particular loans applicable to
each transaction.
The amount of premiums charged generally depends on
loan-to-value
ratios, level of coverage, the borrowers credit history,
type of loan instrument (fixed/floating or adjustable
rate/adjustable payment), documentation and use of property
(owner occupied/investment property). Coverage is non-cancelable
by us, with the exception of non-payment of premium or certain
master policy violations, and premiums are paid under single,
annual or monthly payment plans. The majority of our premiums
are written under monthly premium plans and typically are paid
simultaneously with the borrowers monthly mortgage payment
and passed through to us by the servicer of the loan.
Alternatively, premiums may be paid directly by the originator
of, or investor in, the mortgage loan.
Title Insurance Group ($1,238 million or 31% of our
fiscal 2010 operating revenues). We primarily
issue title insurance to real estate purchasers and investors
based on searches of public records. The policy insures against
losses arising from defects, liens and encumbrances affecting
the insured title and not excluded or exempt from the coverage
of the policy. During fiscal 2010, approximately 36% of our
Title Insurance Group premiums were derived from direct
operations, including our branch offices.
There are two basic types of title insurance: lenders
policies and owners policies. Both types of title
insurance are issued for a one-time premium. Financial
institutions secure title insurance policies to protect their
mortgagees interest in real property. Mortgages in the
U.S. are primarily made by mortgage bankers, savings and
commercial banks, state and federal agencies, and life insurance
companies. The policy remains in effect for the length that the
mortgagee has an interest in the property. A separate title
insurance policy may be issued to the owner of real estate. The
owners policy of title insurance protects interest in the
title of the property.
We charge a varying rate for title insurance policies based
generally on the amount and type of the policy issued. The
premium is collected in full when the real estate transaction is
closed and there are no recurring fees. In many instances
premiums charged on subsequent policies on the same property may
be reduced, depending on the elapsed time between issuance of
the prior policy and the nature of the transactions for which
the policies are issued. Most charges associated with title
services are in conjunction with the issuance of a policy and
not due to the possibility of risk of loss due to insured risks.
The cost of service performed by a title insurer relates, for
the most part, to the prevention of loss rather than to the
assumption of risk of loss. Claim losses that do occur result
primarily from title search and examination mistakes, fraud,
forgery, incapacity, missing heirs and escrow processing errors.
We are also a provider of escrow closing and construction
disbursement services, as well as real estate information
products and services pertaining to real estate transfers and
loan transactions.
Corporate and Other Operations ($91 million or 2% of our
fiscal 2010 operating revenues). Corporate and
other operations include the accounts of a small life and health
insurance business, as well as those of the parent holding
company and several minor corporate services that perform
investment, payroll, administrative and minor marketing services.
We had net premiums from life and health insurance of
$81 million during fiscal 2010. Our life and health
insurance product offerings are sold in the U.S. and Canada
through financial intermediaries such as finance companies,
automobile dealerships, travel agents and marketing channels
that are also utilized in some of our general insurance
operations. In 2004, we terminated and placed in run off our
term life insurance
S-3
portfolio. Production of term life insurance accounted for
$17 million in net premiums earned during fiscal 2010.
Recent
developments
On October 1, 2010, a subsidiary of ours merged with PMA
Capital Corporation (PMA), an insurance holding
company with interests in the commercial property and liability
insurance field. The consideration transferred of
$247.2 million included the issuance of
17,754,047 shares of Old Republic common stock and the
replacement value of PMA stock options. As a result of the
merger, PMA and its subsidiaries became our wholly-owned
subsidiaries. We expect the addition of PMA to our insurance
group to further diversify our General Insurance business.
PMAs insurance products include workers compensation
and other commercial property and casualty lines of insurance.
Fee-based services include third party administrator
(TPA), managing general agent and program
administrator services. The operating subsidiaries are marketed
under PMA Companies and include The PMA Insurance Group, PMA
Management Corp., PMA Management Corp. of New England, Inc., and
Midlands Management Corporation (Midlands).
PMAs insurance products are marketed primarily in the
eastern part of the United States. These products are written
through The PMA Insurance Group, PMAs property and
casualty insurance segment. The PMA Insurance Group primarily
includes the operations of PMAs principal insurance
subsidiaries, Pennsylvania Manufacturers Association
Insurance Company, Manufacturers Alliance Insurance Company and
Pennsylvania Manufacturers Indemnity Company. PMAs
Fee-based Business includes the operations of PMA Management
Corp., PMA Management Corp. of New England, Inc., and Midlands.
PMA Management Corp. is a TPA that provides various claims
administration, risk management, loss prevention and related
services, primarily to self-insured clients under fee for
service arrangements. PMA Management Corp. of New England, Inc.
is a provider of risk management and TPA services. Midlands is a
managing general agent, program administrator and provider of
TPA services. PMA also has a Corporate and Other segment, which
primarily includes corporate expenses and debt service.
It is the opinion of our management and board of directors that
the merger will enhance our growth prospects. We believe that
long-term growth can be achieved through the greater geographic
spread and industry specialization offered by PMAs current
business model.
Concurrent
Offering
Concurrent with the offering of notes pursuant to this
prospectus supplement, we are also offering by a separate
prospectus supplement $250,000,000 aggregate principal amount
of % Convertible Senior Notes
due 2018. Neither offering is conditioned on the other.
S-4
The
Offering
The summary below describes the principal terms of the notes.
Certain of the terms and conditions described below are subject
to important limitations and exceptions. You should read this
prospectus supplement and the accompanying prospectus before
making an investment in the notes. The Description of the
Notes section of this prospectus supplement contains a
more detailed description of the terms and conditions of the
notes. As used in this section, we, our
and us refer to Old Republic International
Corporation and not to any of its consolidated subsidiaries.
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Issuer |
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Old Republic International Corporation, a Delaware corporation |
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Notes Offered |
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$250,000,000 aggregate principal amount
of % Senior Notes due 2021
(the notes). |
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Maturity |
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Unless earlier redeemed, the notes will mature
on ,
2021. |
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Interest |
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The notes will bear interest at %
per year. |
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Interest Payment Dates |
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and
of each year,
beginning ,
2011. |
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Ranking |
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The notes will be our senior unsecured obligations and will rank: |
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senior in right of payment to our existing and
future indebtedness that is expressly subordinated in right of
payment to the notes;
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equal in right of payment to our existing and future
unsecured indebtedness that is not so subordinated;
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junior in right of payment to any of our secured
indebtedness to the extent of the value of the assets securing
such indebtedness; and
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structurally junior to all existing and future
indebtedness and liabilities incurred by our subsidiaries.
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As of December 31, 2010, our total consolidated
indebtedness was approximately $475 million. As of
December 31, 2010, our subsidiaries had total policy
liabilities and accruals of approximately $10.2 billion to
which the notes would have ranked structurally junior, and
neither we nor our subsidiaries had any secured indebtedness
outstanding. |
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The base indenture governing the notes, as supplemented by the
supplemental indenture to be entered into in connection with
this notes offering (which we refer to collectively as the
indenture), does not limit the amount of debt that
we or our subsidiaries may incur. |
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Optional Redemption |
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The notes will be redeemable, at our option, in whole or in part
at any time and from time to time, at the make-whole
redemption price described in Description of the
Notes Optional Redemption. |
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Covenants |
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The indenture for the notes contains limitations on liens on the
voting securities of our principal subsidiaries, as
such term is defined in the section under the caption
Description of the Notes Covenants
Limitation on Liens on Stock of Principal Subsidiaries.
The supplemental indenture also contains restrictions on the
disposal of the voting stock of these subsidiaries. These
covenants are subject to important qualifications and
limitations. |
S-5
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Use of Proceeds |
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We estimate that the proceeds from this offering will be
approximately $ million, and
that the proceeds from the concurrent convertible senior note
offering will be approximately
$ million
($ million if the
underwriters exercise their option to purchase additional notes
in full), each after deducting fees and before estimated
expenses. We intend to use approximately $107.4 million of
such net proceeds to repay certain indebtedness that we assumed
in connection with our acquisition of PMA. We intend to use the
remainder of the net proceeds for general corporate purposes,
including the making of additional capital contributions to our
insurance company subsidiaries as may be necessary. See
Use of Proceeds. |
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Denomination |
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The notes will be issued in minimum denominations of $2,000 and
any integral multiple of $1,000 in excess thereof. |
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Further Issuances |
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We may create and issue additional notes ranking equally and
ratably with the notes in all respects, so that such additional
notes shall be consolidated and form a single series with the
notes, provided that any such additional notes shall be treated
as part of the same issue as the previously offered notes for
U.S. federal income tax purposes. |
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Risk Factors |
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See Risk Factors beginning on
page S-7
of this prospectus supplement and other information included or
incorporated by reference in this prospectus supplement and the
accompanying prospectus for a discussion of the factors you
should carefully consider before deciding to invest in the notes. |
S-6
RISK
FACTORS
Any investment in the notes involves a high degree of risk.
You should carefully consider the risks described below and all
of the information contained herein or incorporated by reference
into this prospectus supplement and the accompanying prospectus
before deciding whether to purchase the notes. In addition, you
should carefully consider, among other things, the matters
discussed under Risk Factors in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010, and in other
documents that we subsequently file with the Securities and
Exchange Commission, all of which are incorporated by reference
into this prospectus supplement and the accompanying prospectus.
The risks and uncertainties described in such incorporated
documents and described below are not the only risks and
uncertainties that we face. Additional risks and uncertainties
not presently known to us or that we currently deem immaterial
may also impair our business operations. If any of those risks
actually occurs, our business, financial condition and results
of operations would suffer, which could adversely affect your
investment in the notes. The risks discussed below also include
forward-looking statements, and our actual results may differ
substantially from those discussed in these forward-looking
statements. See Forward-Looking Statements. As used
in this section, we, our and
us refer to Old Republic International Corporation
and not to any of its consolidated subsidiaries.
Risks
Related to the Notes
The
notes are effectively subordinated to our secured debt and any
liabilities of our subsidiaries.
The notes will be our senior unsecured obligations and will rank
senior in right of payment to our existing and future
indebtedness that is expressly subordinated in right of payment
to the notes; equal in right of payment to our existing and
future indebtedness that is not so subordinated; junior in right
of payment to any of our secured indebtedness to the extent of
the value of the assets securing such indebtedness; and
structurally junior to all existing and future indebtedness and
liabilities incurred by our subsidiaries. In the event of our
bankruptcy, liquidation, reorganization or other winding up, our
assets that secure any of our secured debt will be available to
pay obligations on the notes only after the secured debt has
been repaid in full from these assets. There may not be
sufficient assets remaining to pay amounts due on any or all of
the notes then outstanding. The indenture governing the notes
does not prohibit us from incurring additional senior debt or
secured debt, nor does it prohibit any of our subsidiaries from
incurring additional liabilities.
As of December 31, 2010, our total consolidated
indebtedness was approximately $475 million. As of
December 31, 2010, our subsidiaries had total policy
liabilities and accruals of approximately $10.2 billion to
which the notes would have ranked structurally junior, and
neither we nor our subsidiaries had any secured indebtedness
outstanding.
The
notes are obligations of Old Republic International Corporation
only, and our status as a holding company with no direct
operations could adversely affect our ability to pay dividends
to our stockholders and to service our debt, including the
notes.
Old Republic International Corporation is a holding company that
transacts business through its operating subsidiaries. Our
primary assets are the capital stock of these operating
subsidiaries. Thus, our ability to pay dividends to our
stockholders and to service the indebtedness of Old Republic
International Corporation, including the notes, depends upon the
surplus and earnings of our subsidiaries and their ability to
pay dividends to the holding company. Our subsidiaries are
separate and distinct legal entities and have no obligation,
contingent or otherwise, to make payments on the notes or to
make any funds available for that purpose.
In addition, payment of dividends by our insurance subsidiaries
is restricted by state insurance laws or subject to approval of
the insurance regulatory authorities in the jurisdictions in
which they are domiciled. These authorities recognize only
statutory accounting practices for determining financial
position, results of operations and the ability of an insurer to
pay dividends to its shareholders. The specific rules governing
the payment of dividends by our insurance subsidiaries vary from
jurisdiction to jurisdiction. Our insurance subsidiaries are
domiciled in seventeen different jurisdictions. Generally, under
applicable insurance laws and
S-7
regulations, our insurance subsidiaries are prohibited from
paying dividends to the holding company in excess of either the
greater or lesser of (depending upon the state involved) 10% of
statutory surplus or a portion of statutory net income, without
the prior approval of the applicable insurance regulatory
authority. Based on financial data for the fiscal year ended
December 31, 2010, the maximum amount of dividends payable
to Old Republic International Corporation by its insurance and
non-insurance company subsidiaries during the fiscal year ended
December 31, 2011 without the prior approval of appropriate
regulatory authorities is approximately $306.5 million.
Dividends declared during the fiscal years ended
December 31, 2010, 2009 and 2008 to our company by our
subsidiaries amounted to $181.1 million,
$181.5 million and $191.2 million, respectively. For
example, as a result of the continuing deterioration of the
statutory surplus levels in our Mortgage Guaranty Group during
2010, it is unlikely that some or all of our mortgage guaranty
subsidiaries will be able to pay dividends to the holding
company in 2011 without prior regulatory approval. Of the
approximately $306.5 million in 2010 dividend capacity
referred to above, none was attributable to our mortgage
guaranty subsidiaries. There can be no assurance that our
subsidiaries will be able to continue to pay such dividends to
us in the future. If our subsidiaries are unable to pay
dividends to us in amounts necessary to satisfy our obligations,
our ability to pay dividends to our stockholders, and to service
our debt, including the notes, could be adversely affected.
We
have terminated the standby credit facility that supports our
commercial paper program and as a result will not access our
commercial paper program until we replace that credit facility,
which could adversely affect our liquidity and capital
resources.
Since September 2010, we have maintained a commercial paper
program supported by a syndicated standby credit facility
scheduled to mature in September 2011. On March 1, 2011, we
notified the agent under that credit facility of our election to
terminate the facility effective March 4, 2011. Upon
termination of that credit facility, we will no longer access
our commercial paper program until we obtain a new standby
credit facility. However, there can be no assurance that we will
be able to obtain such a credit facility, or as to the terms of
any such facility we are able to obtain, and our inability to
obtain such a credit facility could have an adverse effect on
our liquidity and capital resources.
The
indenture does not restrict the amount of additional debt that
we or our subsidiaries may incur.
The indenture under which the notes will be issued does not
place any limitation on the amount of indebtedness that we or
our subsidiaries may incur in the future. The incurrence by us
or our subsidiaries of additional debt may have important
consequences for you as a holder of the notes, including making
it more difficult for us to satisfy our obligations with respect
to the notes, a loss in the trading value of your notes, if any,
and a risk that the credit rating of the notes is lowered or
withdrawn.
The
covenants in the indenture are limited; the indenture does not
limit our ability to enter into a change of control
transaction.
The indenture will not contain any provisions restricting our or
any of our subsidiaries ability to
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sell assets (other than certain restrictions on our ability to
consolidate, merge or sell all or substantially all of our
assets and our ability to sell the stock of certain
subsidiaries),
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enter into transactions with affiliates or to create liens
(other than certain limitations on creating liens on the stock
of certain subsidiaries),
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enter into sale and leaseback transactions, or
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create restrictions on the payment of dividends or other amounts
to us from our subsidiaries.
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There are no financial covenants in the indenture and therefore
the indenture does not require that we or our subsidiaries
adhere to any financial tests or ratios or specified levels of
net worth. Additionally, the indenture will not require us to
offer to purchase the notes in connection with a change of
control. Accordingly, the indenture will not afford protection
in the event of a highly leveraged transaction,
S-8
reorganization, change of control, restructuring, merger or
similar transaction that may adversely affect the value of the
notes.
We
cannot assure you that an active trading market will develop for
the notes.
Prior to this offering, there has been no trading market for the
notes. We do not intend to apply for listing of the notes on any
securities exchange or to arrange for quotation on any
interdealer quotation system. We have been informed by the
underwriters that they intend to make a market in the notes
after the offering is completed. However, the underwriters have
no obligation to make a market in the notes and may cease their
market making at any time without notice. In addition, the
liquidity of the trading market in the notes, and the market
price quoted for the notes, may be adversely affected by changes
in the overall market for this type of security and by changes
in our financial performance or prospects or in the prospects
for companies in our industry generally. As a result, we cannot
assure you that an active trading market will develop for the
notes. If an active trading market does not develop or is not
maintained, the market price and liquidity of the notes may be
adversely affected. In that case you may not be able to sell
your notes at a particular time or you may not be able to sell
your notes at a favorable price.
A
downgrade in our ratings from A.M. Best Company,
Standard & Poors Corporation, Moodys or
Fitch Ratings Service could negatively affect our
business.
Ratings are an important factor in establishing the competitive
position of insurance companies. Our insurance companies are
rated by A.M. Best, Standard & Poors,
Moodys, and Fitch. These ratings reflect the rating
companies opinions of an insurance companys and
insurance holding companys financial strength, operating
performance, strategic position and ability to meet its
obligations to policyholders, and are not evaluations directed
to investors. Our ratings are subject to periodic review, and we
cannot assure the continued maintenance of our current ratings.
The principal companies in our General Insurance segment are
rated either A+ (Superior) or A (Excellent) by A.M. Best.
Republic Mortgage Insurance Company, or RMIC, our principal
mortgage insurance subsidiary, is rated BBB- by Fitch, Ba1 by
Moodys and BBB- by Standard & Poors. Our
Title Insurance group is rated A or higher by each of
A.M. Best, Fitch, Moodys and Standard &
Poors.
Substantially all if not all of the mortgage guaranty insurance
companies in the industry, including RMIC, have experienced
ratings downgrades as a result of the decline in the housing
market. Most recently, RMIC was downgraded by Fitch from BBB to
BBB- in December 2009, by Standard & Poors from
A- to BBB- in December 2009, and by Moodys from Baa2 to
Ba1 in February 2010.
There can be no assurance, particularly in the current economic
environment, that our insurance subsidiaries will be able to
maintain their current ratings. If the ratings of any of our
insurance companies are reduced from their current levels, our
business could be adversely affected.
We are
involved in litigation, the ultimate outcome of which is
difficult to predict, and which could have a material adverse
effect on our business.
Legal proceedings against us and our subsidiaries routinely
arise in the normal course of business and usually pertain to
claim matters related to insurance policies and contracts issued
by our insurance subsidiaries. Other, non-routine legal
proceedings that may prove to be material to us or one of our
subsidiaries are discussed in our Annual Report on
Form 10-K
for the year ended December 31, 2010. In addition, on
February 18, 2011, the Federal Deposit Insurance
Corporation, as receiver of Amtrust Bank, filed a suit against
Old Republic Insurance Company (ORIC) in the
U.S. District Court for the Northern District of Ohio
arising out of ORICs termination of a credit indemnity
policy issued to insure home equity loans made or held by
Amtrust. The suit alleges breach of contract and seeks a
declaratory judgment that ORICs attempted termination
and/or
cancellation of the policy did not terminate coverage of the
insured loans and that ORIC remains obligated to provide
coverage for such loans under the policy. The suit seeks damages
in excess of $46 million, declaratory relief, pre- and
post-judgment interest, attorneys fees and costs. Although
we do not believe that this action will have a material adverse
effect on our consolidated financial condition, results of
operations or cash flows, there can be no assurance in those
regards.
S-9
USE OF
PROCEEDS
We estimate that the proceeds from this offering will be
approximately $ million,
after deducting fees and before estimated expenses.
We estimate that the proceeds from the concurrent convertible
senior note offering will be approximately
$ million
($ million if the
underwriters exercise their option to purchase additional notes
in full), after deducting fees and before estimated expenses.
We intend to use approximately $107.4 million of the net
proceeds from this offering and the concurrent convertible
senior note offering to repay certain indebtedness that we
assumed in connection with our acquisition of PMA. Approximately
$42.5 million of this indebtedness matures between
May 15, 2033 and September 30, 2033 and carries
interest rates ranging from LIBOR + 4.05% to LIBOR + 4.20%;
approximately $54.9 million of this indebtedness matures on
June 15, 2018 and carries an interest rate of 8.5%; and
approximately $10.0 million of this indebtedness matures on
November 2, 2035 and carries an interest rate of LIBOR +
4.50%. We intend to use the remainder of the net proceeds for
general corporate purposes, including the making of additional
capital contributions to our insurance company subsidiaries as
may be necessary.
Pending application for the foregoing purposes, the net proceeds
from this offering will be invested in short-term interest
bearing instruments or other investment grade securities.
Neither the completion of the concurrent convertible senior note
offering nor this offering is contingent on the completion of
the other. Nothing in this prospectus should be construed as an
offer to sell, or the solicitation of an offer to buy, any of
our senior notes in the concurrent offering.
S-10
CAPITALIZATION
The following table sets forth our cash position and
capitalization as of December 31, 2010, on:
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an actual basis;
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an as adjusted basis to give effect to (i) the issuance and
sale of the notes in this offering, after deducting the
underwriting discounts and commissions and before estimated
offering expenses, and (ii) the repayment of approximately
$107.4 million of indebtedness; and
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an as further adjusted basis to give effect to the issuance and
sale of the convertible senior notes (assuming no exercise of
the underwriters over-allotment option to purchase
additional convertible senior notes) in the concurrent offering.
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The table should be read in conjunction with the more detailed
information contained in the consolidated financial statements
and notes thereto and Management Analysis of Financial
Position and Results of Operations included in Old
Republic International Corporations annual report on
Form 10-K
for the period ended December 31, 2010 incorporated by
reference into this prospectus supplement.
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December 31, 2010
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As Further
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Actual
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As Adjusted
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Adjusted
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(In millions)
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Cash
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$
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127.3
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$
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268.2
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$
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512.0
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Debt:
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Convertible senior notes due 2012
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316.2
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316.2
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316.2
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Senior notes due 2021 offered hereby
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Convertible senior notes due 2018 offered concurrently herewith
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Debt assumed pursuant to PMA merger
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128.9
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21.5
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21.5
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Other
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29.9
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29.9
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29.9
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Total debt
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475.0
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Preferred Stock:
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Convertible preferred stock(1)
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Common shareholders equity:
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Common stock(1)
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259.2
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259.2
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259.2
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Additional paid-in capital
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649.6
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649.6
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649.6
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Retained earnings
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2,791.4
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2,791.4
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2,791.4
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Accumulated other comprehensive income (loss)
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459.1
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459.1
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459.1
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Unallocated ESSOP shares (at cost)
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(38.0
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(38.0
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(38.0
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Treasury stock (at cost)(1)
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Total common shareholders equity
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4,121.4
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4,121.4
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4,121.4
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Total capitalization
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$
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4,596.4
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$
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$
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(1) |
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At December 31, 2010 there were 75,000,000 shares of
$0.01 par value preferred stock authorized, of which no
shares were outstanding. As of the same date, there were
500,000,000 shares of common stock, $1.00 par value,
authorized, of which 259,222,360 were issued. At
December 31, 2010, there were 100,000,000 shares of
Class B Common Stock, $1.00 par value, authorized, of
which no shares were issued. There were no common shares
classified as treasury stock as of December 31, 2010. |
S-11
DESCRIPTION
OF THE NOTES
The Company will issue the notes under a base indenture dated as
of August 15, 1992, between itself and Wilmington
Trust Company, as supplemented by a supplemental indenture
with respect to the notes. In this section, we refer to the base
indenture (the base indenture), as supplemented by
the supplemental indenture (the supplemental
indenture), collectively as the indenture. The
terms of the notes include those expressly set forth in the
indenture and those made part of the indenture by reference to
the Trust Indenture Act of 1939, as amended (the
Trust Indenture Act).
You may request a copy of the indenture from us as described
under Where You Can Find More Information in the
accompanying prospectus.
The following description is a summary of the material
provisions of the notes and the indenture and does not purport
to be complete. This summary is subject to and is qualified by
reference to all the provisions of the notes and the indenture,
including the definitions of certain terms used in the
indenture. We urge you to read these documents because they, and
not this description, define your rights as a holder of the
notes.
For purposes of this description, references to the
Company, we, our and
us refer only to Old Republic International
Corporation and not to any of its subsidiaries.
General
The aggregate principal amount of the notes offered hereby will
initially be limited to $250,000,000 and will mature
on ,
2021. The notes will be issued only in fully registered form
without coupons in minimum denominations of $2,000 and integral
multiples of $1,000 above that amount. The notes will not be
entitled to any sinking fund. We may, without the consent of the
holders, issue additional notes under the indenture with the
same terms and with the same CUSIP number as the notes offered
hereby in an unlimited aggregate principal amount;
provided that such additional notes must be part of the
same issue as the notes offered hereby for U.S. federal
income tax purposes. We may also from time to time repurchase
notes in open market purchases or negotiated transactions
without giving prior notice to holders.
Interest on the notes will accrue at the rate per annum shown on
the cover of this prospectus supplement from
March , 2011, or from the most recent date to
which interest has been paid or provided for, payable
semi-annually
on
and
of each year, beginning
on ,
2011, to the persons in whose names the notes are registered in
the security register at the close of business on
the
or preceding the relevant interest payment date. Interest will
be computed on the notes on the basis of a
360-day year
of twelve
30-day
months.
If any interest payment date or the stated maturity date or any
earlier date of redemption would fall on a day that is not a
business day, the required payment will be made on the next
succeeding business day and no interest on such payment will
accrue in respect of the delay. The term business
day means any day other than a Saturday, a Sunday or any
other day on which banks or trust companies in The City of New
York are authorized or required by law or executive order to be
closed.
We will pay the principal of and interest on notes in global
form registered in the name of or held by The Depository
Trust Company (DTC) or its nominee in
immediately available funds to DTC or its nominee, as the case
may be, as the registered holder of such global note.
We will pay the principal of any certificated notes at the
office or agency designated by the Company for that purpose. We
have initially designated the trustee as our paying agent and
registrar and its agency in New York City, New York as a
place where notes may be presented for payment or for
registration of transfer. We may, however, change the paying
agent or registrar without prior notice to the holders of the
notes, and the Company may act as paying agent or registrar.
Interest on certificated notes will be payable (i) to
holders having an aggregate principal amount of $5,000,000 or
less, by check mailed to the holders of these notes and
(ii) to holders having an aggregate principal amount of
more than $5,000,000, either by check mailed to each holder or,
upon application by a holder to the registrar not later than the
relevant record date, by wire transfer
S-12
in immediately available funds to that holders account
within the United States, which application shall remain in
effect until the holder notifies, in writing, the registrar to
the contrary.
A holder of certificated notes may transfer or exchange notes at
the office of the registrar in accordance with the indenture.
The registrar and the trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer
documents. No service charge will be imposed by the Company, the
trustee or the registrar for any registration of transfer or
exchange of notes, but the Company may require a holder to pay a
sum sufficient to cover any transfer tax or other similar
governmental charge required by law or permitted by the
indenture.
The registered holder of a note will be treated as the owner of
it for all purposes.
Ranking
The notes will be senior unsecured obligations of the Company
that rank senior in right of payment to all existing and future
indebtedness that is expressly subordinated in right of payment
to the notes. The notes will rank equally in right of payment
with all existing and future indebtedness of the Company that is
not so subordinated. The notes will effectively rank junior to
any secured indebtedness of the Company to the extent of the
value of the assets securing such indebtedness. The notes will
be structurally junior to all existing and future indebtedness
and liabilities incurred by our subsidiaries. In the event of
bankruptcy, liquidation, reorganization or other winding up of
the Company, the assets of the Company that secure secured debt
will be available to pay obligations on the notes only after all
indebtedness under such secured debt has been repaid in full
from such assets. We advise you that there may not be sufficient
assets remaining to pay amounts due on any or all the notes then
outstanding.
As of December 31, 2010, our total consolidated
indebtedness was approximately $475 million. As of
December 31, 2010, our subsidiaries had total policy
liabilities and accruals of approximately $10.2 billion to
which the notes would have ranked structurally junior, and
neither we nor our subsidiaries had any secured indebtedness
outstanding.
The ability of our subsidiaries to pay dividends and make other
payments to us is restricted by, among other things, applicable
corporate and other laws and regulations as well as agreements
to which our subsidiaries may become a party.
The indenture does not limit our ability, or the ability of our
subsidiaries, to incur additional indebtedness. The indenture
and the terms of the notes will not contain any covenants (other
than those described herein) designed to afford holders of any
notes protection in a highly leveraged or other transaction
involving us that may adversely affect holders of the notes.
Optional
Redemption
We may, at our option, at any time and from time to time redeem
the notes, in whole or in part, on not less than 30 nor more
than 60 days prior notice mailed to the holders of
the notes.
The notes will be redeemable at a redemption price, plus accrued
and unpaid interest to the date of redemption, equal to the
greater of
(1) 100% of the principal amount of the notes to be
redeemed or
(2) the sum of the present values of the remaining
scheduled payments of principal and interest on the notes to be
redeemed that would be due after the related redemption date but
for such redemption (except that, if such redemption date is not
an interest payment date, the amount of the next succeeding
scheduled interest payment will be reduced by the amount of
interest accrued thereon to the redemption date), discounted to
the redemption date on a semi-annual basis (assuming a
360-day year
consisting of twelve
30-day
months) at the Treasury Rate
plus
basis points.
Treasury Rate means, with respect to any
redemption date, the rate per annum equal to the semi-annual
equivalent yield to maturity (computed as of the second business
day immediately preceding such redemption
S-13
date) of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for
such redemption date.
Comparable Treasury Issue means the United
States Treasury security selected by an Independent Investment
Banker that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to
the remaining term of the notes. Independent Investment
Banker means one of the Reference Treasury Dealers
appointed by us.
Comparable Treasury Price means, with respect
to any redemption date, (1) the average of the Reference
Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest of such Reference Treasury
Dealer Quotations, or (2) if the Independent Investment
Banker obtains fewer than five such Reference Treasury Dealer
Quotations, the average of all Reference Treasury Dealer
Quotations obtained.
Reference Treasury Dealer means each of
Morgan Stanley & Co. Incorporated and UBS Securities
LLC and their respective successors and assigns and three other
nationally recognized investment banking firms that are Primary
Treasury Dealers specified from time to time by us, except that
if any of the foregoing ceases to be a primary
U.S. government securities dealer in the United States (a
Primary Treasury Dealer), we are required to
designate as a substitute another nationally recognized
investment banking firm that is a Primary Treasury Dealer.
Reference Treasury Dealer Quotations means,
with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the Independent
Investment Banker, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the
Independent Investment Banker by such Reference Treasury Dealer
as of 3:30 p.m., New York City time, on the third business
day preceding such redemption date.
On and after any redemption date, interest will cease to accrue
on the notes called for redemption. Prior to any redemption
date, we are required to deposit with a paying agent money
sufficient to pay the redemption price of and accrued interest
on the notes to be redeemed on such date. If we are redeeming
less than all the notes, the trustee under the indenture must
select the notes to be redeemed by such method as the trustee
deems fair and appropriate in accordance with methods generally
used at the time of selection by fiduciaries in similar
circumstances.
We will give written notice of any redemption to holders of
notes to be redeemed at their addresses, as shown in the
security register for the affected notes, not more than 60 nor
less than 30 days prior to the date fixed for redemption.
The notice of redemption will specify, among other items, the
aggregate principal amount of the notes to be redeemed, the
redemption date and the redemption price.
If we choose to redeem less than all of the notes, then we will
notify the trustee at least 60 days before giving notice of
redemption, or such shorter period as is satisfactory to the
trustee, of the aggregate principal amount of the notes to be
redeemed and the redemption date. The trustee will select, in
the manner it deems fair and appropriate, the notes to be
redeemed in part. See also Book-entry,
Settlement and Clearance and Global
Clearance and Settlement Procedures below.
If we have given notice as provided in the indenture and made
funds irrevocably available for the redemption of any notes
called for redemption on the redemption date referred to in that
notice, then those notes will cease to bear interest on that
redemption date and the only remaining right of the holders of
those notes will be to receive payment of the redemption price.
Covenants
Merger,
Consolidation and Sale of Assets
The indenture provides that the Company will not consolidate
with or merge into any other corporation or convey or transfer
or lease its properties and assets substantially as an entirety
to any person unless:
(1) the corporation formed by such consolidation or into
which the Company is merged or the person which acquires by
conveyance or transfer, or which leases the properties and
assets of the
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Company substantially as an entirety shall be a corporation
organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia, and
shall expressly assume, by a supplemental indenture, executed
and delivered to the trustee, all of the obligations of the
Company on all of the debt securities outstanding under the base
indenture;
(2) immediately after giving effect to such transaction, no
default or event of default (each as defined in the indenture)
shall have occurred and be continuing; and
(3) the Company shall have delivered to the trustee an
officers certificate and an opinion of counsel, each
stating that such consolidation, merger, conveyance, transfer or
lease and such supplemental indenture comply with this provision
and that all conditions precedent provided for in the indenture
relating to such transaction have been complied with.
Upon any consolidation or merger with or into any other person
or any conveyance, transfer or lease of all or substantially all
of our properties and assets to any other person, the successor
person will succeed to, and be substituted for, us under the
indenture, and we, except in the case of a lease, will be
relieved of all obligations and covenants under the notes and
the indenture to the extent we were the predecessor person.
Limitation
on Liens on Stock of Principal Subsidiaries.
So long as any notes are outstanding, we will not, and we will
not permit any of our principal subsidiaries to, incur, assume
or guarantee any debt secured by a lien on any voting stock
issued by any of our principal subsidiaries, unless all of the
notes are secured to the same extent as and for so long as that
debt is so secured. This restriction does not apply to liens
existing at the time a corporation becomes a principal
subsidiary of ours or to any renewal or extension of any such
existing lien and does not apply to shares of subsidiaries that
are not principal subsidiaries.
Principal subsidiary means any present or future
subsidiary of Old Republic, the consolidated total assets of
which constitute at least 15% of the total consolidated assets
of Old Republic, and any successor to any such subsidiary.
Limitation
on Issuance or Disposition of Stock of Principal
Subsidiaries.
So long as any notes are outstanding, we will not, nor will we
permit any of our principal subsidiaries to, issue, sell,
assign, transfer or otherwise dispose of any of the voting stock
of a principal subsidiary except for:
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any issuance, sale, assignment, transfer or other disposition
made in compliance with the order of a court or regulatory
authority, unless the order was requested by us or one of our
principal subsidiaries;
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any of the voting stock of a principal subsidiary owned by us or
by a principal subsidiary sold for cash or other property having
a fair market value that is at least equal to the fair market
value of the disposed stock, as determined in good faith by our
board of directors; or
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any issuance, sale, assignment, transfer or other disposition of
voting stock of a principal subsidiary to us or to another
principal subsidiary.
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The transfer of assets from a principal subsidiary to any other
person, including to us or another of our subsidiaries, is not
prohibited under the senior indenture.
Events of
Default
Each of the following is an event of default under the indenture:
(1) the Company defaults in the payment of interest on any
note when the same becomes due and payable and such default
continues for a period of 30 days;
(2) the Company defaults in the payment of principal of, or
premium, if any, on, any note when the same becomes due and
payable, whether at its stated maturity or any earlier date of
redemption, upon acceleration, upon declaration or otherwise;
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(3) the Company defaults in the performance of or breaches
any other covenant or agreement of the Company in the indenture
with respect to the notes (other than a covenant or agreement in
respect of which non-compliance by the Company would otherwise
be an event of default) and such default or breach continues for
a period of 60 consecutive days after written notice to the
Company by the trustee or to the Company and the trustee by the
holders (as defined in the indenture) of 10% or more
in aggregate principal amount of the notes then outstanding;
(4) an event of default as defined in any mortgage,
indenture or instrument under which there may be issued, or by
which there may be secured or evidenced, any indebtedness of the
Company or any significant subsidiary (as defined in
Article 1,
Rule 1-02
of
Regulation S-X)
of the Company for money borrowed in excess of $50 million,
whether such indebtedness now exists or shall hereafter be
created, shall happen and shall result in such indebtedness
becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable, and such
acceleration shall not be rescinded or annulled, or such
indebtedness shall not have been discharged, within a period of
10 days after there shall have been given, by registered or
certified mail, to the Company by the trustee or to the Company
and the trustee by the holders of at least 10% in principal
amount of the notes then outstanding, a written notice
specifying such event of default and requiring that such
acceleration be rescinded or annulled or such indebtedness to be
discharged;
(5) a final judgment for the payment of $50 million or
more (excluding any amounts covered by insurance) rendered
against the Company or any significant subsidiary of the
Company, which judgment is not discharged or stayed within
60 days after (i) the date on which the right to
appeal or petition for review thereof has expired if no such
appeal or review has commenced, or (ii) the date on which
all rights to appeal or petition for review have been
extinguished; or
(6) certain events of bankruptcy, insolvency,
rehabilitation or reorganization of the Company or any of our
significant subsidiaries.
If an event of default, other than as described in the next
sentence, occurs and is continuing, then, and in each and every
such case, except for any notes the principal of which shall
have already become due and payable, either the trustee or the
holders of not less than 25% in aggregate principal amount of
the notes then outstanding under the indenture, by notice in
writing to the Company (and to the trustee if given by holders),
may declare the entire principal amount of all the notes, and
the interest accrued on such notes, if any, to be due and
payable immediately, and upon any such declaration the same
shall become immediately due and payable. If an event of default
described in clause (6) occurs and is continuing with
respect to the Company, then the principal amount of all the
notes then outstanding and interest accrued on such notes, if
any, shall be and become immediately due and payable, without
any notice or other action by any holder or the trustee, to the
full extent permitted by applicable law.
The provisions described in the paragraph above, however, are
subject to the condition that if, at any time after the
principal of the notes shall have been so declared due and
payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained as provided in the
indenture, the Company will pay or will deposit with the trustee
a sum sufficient to pay all matured installments of interest
upon all the notes and the principal of any and all notes which
shall have become due otherwise than by acceleration (with
interest upon such principal and, to the extent that payment of
such interest is enforceable under applicable law, on overdue
installments of interest, at the rate or rates, if any,
specified in the notes to the date of such payment or deposit)
and such amount as shall be sufficient to cover all amounts
owing to the trustee and its agents and counsel, and if any and
all events of default under the indenture, other than the
non-payment of the principal of notes which shall have become
due by acceleration, shall have been cured, waived or otherwise
remedied as provided in the indenture, then and in every such
case the holders of a majority in aggregate principal amount of
all the notes then outstanding, by written notice to the Company
and to the trustee, may rescind and annul such declaration and
its consequences, but no such rescission and annulment will
extend to or shall affect any subsequent default or shall impair
any right consequent on such default.
Subject to certain restrictions, the holders of at least a
majority in aggregate principal amount of the notes outstanding
may direct the time, method and place of conducting any
proceeding for any remedy available to
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the trustee or exercising any trust or power conferred on the
trustee. The indenture provides that in the event an event of
default has occurred and is continuing, the trustee will be
required in the exercise of its powers to use the degree of care
that a prudent person would use in the conduct of its own
affairs.
Subject to the provisions of the indenture relating to the
duties of the trustee, if an event of default occurs and is
continuing, the trustee will be under no obligation to exercise
any of the rights or powers under the indenture at the request
or direction of any of the holders unless such holders have
offered to the trustee indemnity or security reasonably
satisfactory to it against any loss, liability or expense.
Except to enforce the right to receive payment of principal or
interest when due, no holder of any notes may institute any
proceeding, judicial or otherwise, with respect to the indenture
or the notes, or for the appointment of a receiver or trustee,
or for any other remedy under the indenture, unless:
(i) such holder has previously given to the trustee written
notice of a continuing event of default with respect to the
notes;
(ii) the holders of at least 25% in aggregate principal
amount of outstanding notes shall have made written request to
the trustee to institute proceedings in respect of such event of
default in its own name as trustee under the indenture;
(iii) such holder or holders have offered to the trustee
reasonable indemnity against any costs, liabilities or expenses
(including fees and expenses of its counsel) to be incurred in
compliance with such request;
(iv) the trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute
any such proceeding; and
(v) during such
60-day
period, the holders of a majority in aggregate principal amount
of the outstanding notes have not given the trustee a direction
that is inconsistent with such written request.
The indenture provides that if a default occurs and is
continuing and is known to the trustee, the trustee must mail to
each holder notice of the default within 90 days after it
occurs. Except in the case of a default in the payment of
principal of or interest on any note, the trustee may withhold
notice if and so long as a committee of trust officers of the
trustee in good faith determines that withholding notice is in
the interests of the holders.
Modification
and Amendment; Waiver
The indenture allows the Company and the trustee, with the
consent of the holders of not less than a majority in principal
amount of the outstanding notes, to execute supplemental
indentures adding any provisions to or changing or eliminating
any of the provisions of the indenture or modifying the rights
of the holders of the notes. However, without the consent of the
holders of all the outstanding notes affected thereby, no
supplemental indenture may:
(1) change the stated maturity of the principal of, or
interest on, any note;
(2) reduce the principal amount of, or the rate of interest
on, any note;
(3) change any place of payment where, or the currency in
which, any note or any interest thereon is payable;
(4) impair the right to institute suit for the enforcement
of any payment on or after the stated maturity of the note;
(5) reduce the percentage in principal amount of the notes,
the consent of whose holders is required for a supplemental
indenture, or the consent of whose holders is required for any
waiver of compliance with various provisions of the indenture or
various defaults thereunder and their consequences provided for
in the indenture; or
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(6) modify any of the foregoing provisions described in
clause (5) above except to increase any such percentage or
to provide that other provisions of the indenture cannot be
modified or waived without the consent of the holder of each
outstanding note affected thereby.
The Company and the trustee may amend or supplement the
indenture or the notes without notice to or the consent of any
holder to, among other things:
(1) evidence the succession of another corporation to us
and the assumption of our covenants and obligations under the
notes and the indenture by this successor;
(2) add to the Companys covenants for the benefit of
the holders of the notes or to surrender any right or power
conferred upon the Company;
(3) cure any ambiguity or make any other provisions that do
not adversely affect the interests of the holders of the notes
in any material respect;
(4) add guarantees with respect to the notes; and
(5) conform the provisions of the indenture to the
Description of the Notes section in this prospectus
supplement.
Except for certain specified provisions, the holders of at least
a majority in principal amount of the outstanding notes may, on
behalf of the holders of all the notes, waive our compliance
with certain provisions of the indenture (including those
specified under Covenants.) The holders
of a majority in principal amount of the outstanding notes may
waive any past defaults (except with respect to nonpayment of
principal or interest or with respect to any covenant or
provision that cannot be modified or amended without the consent
of all holders).
The consent of the holders is not necessary under the indenture
to approve the particular form of any proposed amendment or
supplement, but it shall be sufficient if such consent approves
the substance of such proposed amendment or supplement. After an
amendment or supplement becomes effective, the Company shall
give to the holders affected by such amendment or supplement a
notice briefly describing such amendment or supplement. The
Company will mail supplemental indentures to holders upon
request. Any failure of the Company to mail such notice, or any
defect in such notice, shall not, however, in any way impair or
affect the validity of any such supplemental indenture.
Satisfaction
and Discharge; Defeasance
We will be discharged from certain obligations to holders of the
notes that have not already been delivered to the trustee for
cancellation and that either
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have become due and payable or will become due and payable
within one year or
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have been scheduled for redemption within one year,
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by depositing with the trustee, in trust, funds in
U.S. dollars in an amount sufficient to pay the entire
indebtedness on such notes with respect to principal and any
premium and interest to the date of such deposit, if such notes
have become due and payable, or to the maturity thereof, as the
case may be.
If there is a change in U.S. federal tax law as described
below, subject to the conditions described below, at any time we
may terminate all of our obligations under the notes and the
indenture (legal defeasance) except for certain
obligations (including those respecting the defeasance trust and
obligations to register the transfer or exchange of the notes,
to replace mutilated, destroyed, lost or stolen notes and to
maintain a registrar and paying agent in respect of the notes).
In addition, subject to the conditions described below, at any
time we may terminate as to the notes:
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our obligations under the covenants described under
Covenants and
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the operation of the event of default provision relating to our
failure to comply with such covenants as described under
Events of Default (covenant
defeasance).
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S-18
In the event we effect covenant defeasance with respect to the
notes and the notes are declared due and payable because of the
occurrence of any event of default other than an event of
default with respect to the covenants as to which covenant
defeasance has been effected, which covenants would no longer be
applicable to the notes after covenant defeasance, the amount of
monies
and/or
government obligations deposited with the trustee to effect
covenant defeasance may not be sufficient to pay amounts due on
the notes at the time of any acceleration resulting from that
event of default. However, we would remain liable to make
payment of those amounts due at the time of acceleration.
The legal defeasance option or the covenant defeasance option
may be exercised only if, among other things, the following
conditions are satisfied:
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we must deposit in trust for the benefit of all holders of the
notes a combination of money and U.S. government
obligations that will generate enough cash to make interest,
principal and any other payments on the notes on their various
due dates;
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in the case of legal defeasance, there must be a change in
current U.S. federal tax law or an Internal Revenue Service
ruling, confirmed in an opinion of counsel, that the holders of
the notes will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of the legal
defeasance and will be subject to U.S. federal income tax
on the same amounts, in the same manner and at the same times as
would have been the case if the legal defeasance had not
occurred; and
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in the case of covenant defeasance, we must deliver to the
trustee a legal opinion of our counsel confirming that the
holders of the notes will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of the
covenant defeasance and will be subject to U.S. federal
income tax on the same amounts, in the same manner and at the
same times as would have been the case if the covenant
defeasance had not occurred.
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Reports
The indenture provides that any documents or reports that we are
required to file with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Exchange Act must be
filed by us with the trustee within 15 days after the same
are required to be filed with the Securities and Exchange
Commission (giving effect to any grace period provided by
Rule 12b-25
under the Exchange Act).
Trustee
Wilmington Trust Company is the trustee, security registrar
and paying agent. Wilmington Trust Company in each of its
capacities, including without limitation as trustee, security
registrar and paying agent, assumes no responsibility for the
accuracy or completeness of the information concerning us or our
affiliates or any other party contained in this document or the
related documents or for any failure by us or any other party to
disclose events that may have occurred and may affect the
significance or accuracy of such information.
We maintain banking relationships in the ordinary course of
business with the trustee and its affiliates.
Governing
Law
The notes and the indenture will be governed by, and construed
in accordance with, the laws of the State of New York.
Book-entry,
Settlement and Clearance
The Depository Trust Company, or DTC, which we
refer to along with its successors in this capacity as the
depositary, will act as securities depositary for the notes. The
notes will be issued only as fully registered securities
registered in the name of Cede & Co., the
depositarys nominee. One or more fully registered global
security certificates, representing the total aggregate
principal amount of the notes, will be issued and will be
deposited with the depositary or its custodian and will bear a
legend regarding the restrictions on exchanges and registration
of transfer referred to below.
S-19
The laws of some jurisdictions may require that some purchasers
of securities take physical delivery of securities in definitive
form. These laws may impair the ability to transfer beneficial
interests in the notes so long as the notes are represented by
global security certificates.
Investors may elect to hold interests in the global notes
through either DTC in the United States or Clearstream Banking,
société anonyme (Clearstream, Luxembourg)
or Euroclear Bank S.A./N.V., as operator of the Euroclear System
(the Euroclear System ), in Europe if they are
participants of such systems, or indirectly through
organizations which are participants in such systems.
Clearstream, Luxembourg and the Euroclear System will hold
interests on behalf of their participants through
customers securities accounts in Clearstream,
Luxembourgs and the Euroclear Systems names on the
books of their respective depositaries, which in turn will hold
such interests in customers securities accounts in the
depositaries names on the books of DTC. Citibank N.A. will
act as depositary for Clearstream, Luxembourg and JPMorgan Chase
Bank, N.A. will act as depositary for the Euroclear System (in
such capacities, the U.S. Depositaries).
DTC advises that it 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. The depositary holds securities that its participants
deposit with the depositary. The depositary also facilitates the
settlement among participants of securities transactions,
including 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. The rules
applicable to the depositary and its participants are on file
with the SEC.
Clearstream, Luxembourg advises that it is incorporated under
the laws of Luxembourg as a professional depositary.
Clearstream, Luxembourg holds securities for its participating
organizations (Clearstream Participants) and
facilitates the clearance and settlement of securities
transactions between Clearstream Participants through electronic
book-entry changes in accounts of Clearstream Participants,
thereby eliminating the need for physical movement of
certificates. Clearstream, Luxembourg provides to Clearstream
Participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally
traded securities and securities lending and borrowing.
Clearstream, Luxembourg interfaces with domestic markets in
several countries. As a professional depositary, Clearstream,
Luxembourg is subject to regulation by the Luxembourg Commission
for the Supervision of the Financial Sector (Commission de
Surveillance du Secteur Financier). Clearstream Participants are
recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations
and may include the underwriters. Indirect access to
Clearstream, Luxembourg is also available to others, such as
banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Clearstream
Participant, either directly or indirectly.
Distributions with respect to interests in the notes held
beneficially through Clearstream, Luxembourg will be credited to
cash accounts of Clearstream Participants in accordance with its
rules and procedures, to the extent received by the
U.S. Depositary for Clearstream, Luxembourg.
The Euroclear System advises that it was created in 1968 to hold
securities for participants of the Euroclear System
(Euroclear Participants) and to clear and settle
transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and
cash. The Euroclear System includes various other services,
including securities lending and borrowing and interfaces with
domestic markets in several countries. The Euroclear System is
operated by Euroclear Bank S.A./N.V. (the Euroclear
Operator ). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and
Euroclear System cash accounts are accounts with the Euroclear
Operator. Euroclear Participants include banks (including
central banks), securities brokers and dealers and other
professional financial intermediaries and may include the
underwriters. Indirect access to the Euroclear System
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is also available to other firms that clear through or maintain
a custodial relationship with a Euroclear Participant, either
directly or indirectly.
Securities clearance accounts and cash accounts with the
Euroclear Operator are governed by the Terms and Conditions
Governing Use of Euroclear and the related Operating Procedures
of the Euroclear System, and applicable Belgian law
(collectively, the Terms and Conditions). The Terms
and Conditions govern transfers of securities and cash within
the Euroclear System, withdrawals of securities and cash from
the Euroclear System, and receipts of payments with respect to
securities in the Euroclear System. All securities in the
Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms
and Conditions only on behalf of Euroclear Participants, and has
no records of or relationship with persons holding through
Euroclear Participants.
Distributions with respect to notes held beneficially through
the Euroclear System will be credited to the cash accounts of
Euroclear Participants in accordance with the Terms and
Conditions, to the extent received by the U.S. Depositary
for the Euroclear System.
Notes in physical, certificated form will be issued and
delivered to each person that the depositary identifies as a
beneficial owner of the related notes only if:
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DTC notifies us at any time that it is unwilling or unable to
continue as depositary for the global notes and a successor
depositary is not appointed within 60 days;
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DTC ceases to be registered as a clearing agency under the
Exchange Act and a successor depositary is not appointed within
60 days; or
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an event of default with respect to the notes has occurred and
is continuing.
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As long as the depositary or its nominee is the registered owner
of the global security certificates, the depositary or its
nominee, as the case may be, will be considered the sole owner
and holder of the global security certificates and all notes
represented by these certificates for all purposes under the
notes and the indenture. Except in the limited circumstances
referred to above, owners of beneficial interests in global
security certificates:
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will not be entitled to have the notes represented by these
global security certificates registered in their names, and
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will not be considered to be owners or holders of the global
security certificates or any notes represented by these
certificates for any purpose under the notes or the indenture.
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All payments on the notes represented by the global security
certificates and all transfers and deliveries of related notes
will be made to the depositary or its nominee, as the case may
be, as the holder of the securities.
Ownership of beneficial interests in the global security
certificates will be limited to participants or persons that may
hold beneficial interests through institutions that have
accounts with the depositary or its nominee. Ownership of
beneficial interests in global security certificates will be
shown only on, and the transfer of those ownership interests
will be effected only through, records maintained by the
depositary or its nominee, with respect to participants
interests, or any participant, with respect to interests of
persons held by the participant on their behalf. Payments,
transfers, deliveries, exchanges and other matters relating to
beneficial interests in global security certificates may be
subject to various policies and procedures adopted by the
depositary from time to time. Neither we nor the trustee will
have any responsibility or liability for any aspect of the
depositarys or any participants records relating to,
or for payments made on account of, beneficial interests in
global security certificates, or for maintaining, supervising or
reviewing any of the depositarys records or any
participants records relating to these beneficial
ownership interests.
Although the depositary has agreed to the foregoing procedures
in order to facilitate transfers of interests in the global
security certificates among participants, the depositary is
under no obligation to perform or continue to perform these
procedures, and these procedures may be discontinued at any
time. We will not have
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any responsibility for the performance by the depositary or its
direct participants or indirect participants under the rules and
procedures governing the depositary.
The information in this section concerning the depositary, its
book-entry system, Clearstream, Luxembourg and the Euroclear
System has been obtained from sources that we believe to be
reliable, but we have not attempted to verify the accuracy of
this information.
Global
Clearance and Settlement Procedures
Initial settlement for the notes will be made in immediately
available funds. Secondary market trading between DTC
Participants will occur in the ordinary way in accordance with
DTC rules and will be settled in immediately available funds
using DTCs
Same-Day
Funds Settlement System. Secondary market trading between
Clearstream Participants
and/or
Euroclear Participants will occur in the ordinary way in
accordance with the applicable rules and operating procedures of
Clearstream, Luxembourg and the Euroclear System, as applicable.
Cross-market transfers between persons holding directly or
indirectly through DTC on the one hand, and directly or
indirectly through Clearstream Participants or Euroclear
Participants, on the other, will be effected through DTC in
accordance with DTC rules on behalf of the relevant European
international clearing system by its U.S. Depositary;
however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines
(European time). The relevant European international clearing
system will, if the transaction meets its settlement
requirements, deliver instructions to its U.S. Depositary
to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or
receiving payment in accordance with normal procedures for
same-day
funds settlement applicable to DTC. Clearstream Participants and
Euroclear Participants may not deliver instructions directly to
their respective U.S. Depositaries.
Because of time-zone differences, credits of notes received in
Clearstream, Luxembourg or the Euroclear System as a result of a
transaction with a DTC Participant will be made during
subsequent securities settlement processing and dated the
business day following the DTC settlement date. Such credits or
any transactions in such notes settled during such processing
will be reported to the relevant Euroclear Participant or
Clearstream Participant on such business day. Cash received in
Clearstream, Luxembourg or the Euroclear System as a result of
sales of the notes by or through a Clearstream Participant or a
Euroclear Participant to a DTC Participant will be received with
value on the DTC settlement date but will be available in the
relevant Clearstream, Luxembourg or the Euroclear System cash
account only as of the business day following settlement in DTC.
Although DTC, Clearstream, Luxembourg and the Euroclear System
have agreed to the foregoing procedures in order to facilitate
transfers of notes among participants of DTC, Clearstream,
Luxembourg and the Euroclear System, they are under no
obligation to perform or continue to perform such procedures and
such procedures may be discontinued or changed at any time.
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CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the U.S. federal income tax
considerations relating to the purchase, ownership and
disposition of the notes. This summary addresses only the
U.S. federal income tax considerations relevant to holders
of the notes that purchase the notes on original issuance at the
public offering price indicated on the cover of this prospectus
supplement and that hold the notes as capital assets, within the
meaning of the Internal Revenue Code of 1986, as amended (the
Code).
This description does not address tax considerations applicable
to holders that may be subject to certain special
U.S. federal income tax rules, such as:
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financial institutions,
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insurance companies,
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real estate investment trusts,
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regulated investment companies,
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grantor trusts,
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entities which are classified as partnerships for
U.S. federal income tax purposes,
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dealers or traders in securities or currencies or notional
principal contracts,
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tax-exempt entities,
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certain former citizens or long-term residents of the United
States,
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persons that will hold the notes or shares of our common stock
as part of a hedging or conversion
transaction or as a position in a straddle or as
part of a synthetic security or other integrated
transaction for U.S. federal income tax purposes, or
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U.S. Holders (as defined below) that have a
functional currency other than the U.S. dollar.
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Holders of the notes who are in any of the above categories
should consult their own tax advisors regarding the
U.S. federal income tax consequences relating to the
purchase, ownership, and disposition of the notes, as the
U.S. federal income tax consequences for persons in the
above categories relating to the purchase, ownership, and
disposition of the notes may be significantly different from
those described below. Moreover, this summary does not address
the U.S. federal estate and gift or alternative minimum tax
consequences, or any U.S. state or local tax consequences,
of the purchase, ownership and disposition of the notes.
This summary is not intended to constitute a complete analysis
of all U.S. federal income tax consequences relating to the
purchase, ownership, and disposition of the notes. Prospective
purchasers of the notes should consult their own tax advisors
with respect to the U.S. federal, state, local and foreign
tax consequences of purchasing, owning or disposing of the notes.
This summary is based upon the Code, proposed, temporary and
final Treasury Regulations promulgated under the Code, and
judicial and administrative interpretations of the Code and
Treasury Regulations, in each case as in effect and available as
of the date of this prospectus supplement. The Code, Treasury
Regulations and judicial and administrative interpretations
thereof may change at any time, and any change could be
retroactive to the date of this prospectus supplement. The Code,
Treasury Regulations and judicial and administrative
interpretations thereof are also subject to various
interpretations, and there can be no guarantee that the Internal
Revenue Service (the IRS) or U.S. courts will
agree with the tax consequences described in this summary.
U.S.
Holders
For purposes of this summary, a U.S. Holder is
a beneficial owner of the notes that, for U.S. federal
income tax purposes, is:
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a citizen or individual resident of the United States,
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a corporation, or other entity treated as a corporation for
U.S. federal income tax purposes, created or organized in
or under the laws of the United States or any state thereof
(including the District of Columbia),
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an estate the income of which is subject to U.S. federal
income taxation regardless of its source, or
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a trust if such trust was in existence on August 20, 1996
and validly elected to be treated as a United States person for
U.S. federal income tax purposes or if (1) a court
within the United States is able to exercise primary supervision
over its administration and (2) one or more United States
persons have the authority to control all of the substantial
decisions of such trust.
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If a partnership (or any other entity treated as a partnership
for U.S. federal income tax purposes) holds the notes, the
tax treatment of a partner in the partnership will generally
depend on the status of the partner and the activities of the
partnership. Such a partner in such a partnership should consult
their own tax advisor as to the U.S. federal income tax
consequences of such partnership acquiring, owning, or disposing
of the notes.
Interest
income
The notes will be issued without original issue discount for
U.S. federal income tax purposes. Therefore, payments of
interest on the notes generally will be taxable to a
U.S. Holder as ordinary interest income (in accordance with
the U.S. Holders regular method of tax accounting) at
the time such payments are accrued or received.
Sale,
redemption or other taxable disposition of the
notes
Upon a sale, redemption or other taxable disposition of notes
(collectively, a disposition), a U.S. Holder
generally will recognize capital gain or loss in an amount equal
to the difference between the amount realized on the
disposition, other than amounts attributable to accrued but
unpaid interest on the notes (which will be treated and taxable
as a payment of interest), and the U.S. Holders tax
basis in such notes. A U.S. Holders tax basis in a
note generally will be equal to the cost of the note to the
U.S. Holder. Any such capital gain or loss generally will
be long-term capital gain or loss if the U.S. Holders
holding period for the notes is more than one year at the time
of disposition, and will be short-term capital gain or loss if
the holding period is one year or less at the time of
disposition. Presently, for non-corporate U.S. Holders,
long-term capital gains generally will be subject to reduced
rates of taxation. The utilization of capital losses is subject
to certain limitations.
Information
reporting and backup withholding requirements
Unless a U.S. Holder of the notes is a corporation or other
exempt recipient, payments of interest made by us on, or the
proceeds from the sale or other disposition of, the notes that
are made within the United States or through certain United
States-related financial intermediaries may be subject to
information reporting. These payments may also be subject to
U.S. federal backup withholding, currently at a rate of
twenty-eight percent (28%), if the U.S. Holder of the notes
fails to supply a correct taxpayer identification number or
otherwise fails to comply with applicable U.S. information
reporting or certification requirements. Backup withholding is
not an additional tax. Any amount withheld from a payment to a
U.S. Holder of the notes under the backup withholding rules
is allowable as a credit against such U.S. Holders
U.S. federal income tax and may entitle such holder to a
refund, provided that the required information is timely
furnished to the IRS.
Recently
enacted federal tax legislation
Recently enacted legislation requires certain U.S Holders who
are individuals, estates or trusts to pay an additional 3.8% tax
on, among other things, interest on and capital gains from the
sale or other disposition of the notes for taxable years
beginning after December 31, 2012. U.S. Holders should
consult their own tax advisors regarding the effect, if any, of
this legislation on their ownership and disposition of the notes.
Non-U.S.
Holders
A
non-U.S. Holder
means a beneficial owner of the notes that is neither a
U.S. Holder nor a domestic partnership. Special rules may
apply to certain
non-U.S. Holders
such as controlled foreign corporations or
passive foreign investment companies. Such entities
should consult their own tax advisors to determine the
U.S. federal, state, local and other tax consequences that
may be relevant to them.
S-24
Interest
income
All payments of stated interest and principal on the notes made
to a
non-U.S. Holder
will be exempt from U.S. federal income and withholding
tax, provided that: (i) the
non-U.S. Holder
does not own, actually or constructively, 10% or more of the
total combined voting power of all classes of our stock entitled
to vote, (ii) the
non-U.S. Holder
is not a controlled foreign corporation related, directly or
indirectly, to us through stock ownership, (iii) the
non-U.S. Holder
is not a bank receiving certain types of interest, (iv) the
beneficial owner of the notes certifies, under penalties of
perjury, to us or our paying agent on IRS
Form W-8BEN
(or appropriate substitute form) that it is not a United States
person and provides its name, address and certain other required
information or certain other certification requirements are
satisfied, and (v) such payments and gain are not
effectively connected with such
non-U.S. Holders
conduct of a trade or business in the United States.
If a
non-U.S. Holder
cannot satisfy the requirements described above, payments of
interest will be subject to the 30% U.S. federal
withholding tax, unless such
non-U.S. Holder
provides us with a properly executed (i) IRS
Form W-8BEN
(or appropriate substitute form) claiming an exemption from or
reduction in withholding under an applicable income tax treaty
or (ii) IRS
Form W-8ECI
(or appropriate substitute form) stating that interest paid or
accrued on the notes is not subject to withholding tax because
it is effectively connected with the conduct of a trade or
business in the United States.
Sale,
exchange, redemption, or other disposition of
notes
A
non-U.S. Holder
generally will not be subject to U.S. federal income tax on
gain realized on the sale, exchange, redemption, or disposition
of notes unless (i) the gain is effectively connected with
the conduct of a U.S. trade or business of the
non-U.S. Holder,
(ii) in the case of a
non-U.S. Holder
who is a nonresident alien individual, the individual is present
in the United States for 183 or more days in the taxable year of
the disposition and certain other conditions are met, or
(iii) we have been a United States real property holding
corporation at any time within the shorter of the five-year
period preceding such sale, exchange, redemption, conversion or
other disposition and the
non-U.S. Holders
holding period in the common stock or notes. We believe that we
are not, and do not anticipate becoming, a United States real
property holding corporation.
Income
or gains effectively connected with a U.S. trade or
business
If a
non-U.S. Holder
of notes is engaged in a trade or business in the U.S., and if
interest on the notes, or gain realized on the sale, exchange,
or disposition of the notes is effectively connected with the
conduct of such trade or business, the
non-U.S. Holder,
although exempt from the withholding tax in the manner discussed
in the preceding paragraphs, generally will be required to file
a U.S. federal income tax return and will be subject to
regular U.S. federal income tax on such income or gain in
the same manner as if it were a U.S. Holder. In addition,
if such a
non-U.S. Holder
is a foreign corporation, such
non-U.S. Holder
may be subject to a branch profits tax equal to 30% (or such
lower rate provided by an applicable treaty) of its effectively
connected earnings and profits for the taxable year, subject to
certain adjustments.
Information
reporting
We must report annually to the IRS and to each
non-U.S. Holder
the amount of interest paid to such
non-U.S. Holder
and the tax withheld with respect to such interest, regardless
of whether withholding was required. Copies of the information
returns reporting such interest and withholding may also be made
available to the tax authorities in the country in which the
non-U.S. Holder
resides under the provisions of an applicable income tax treaty.
Information reporting will apply to the proceeds of a sale of
the notes within the United States or conducted through certain
United States-related financial intermediaries, unless the
beneficial owner certifies under penalties of perjury that it is
a
non-U.S. Holder
(and the payor does not have actual knowledge or reason to know
that the beneficial owner is a United States person as defined
under the Code), or such owner otherwise establishes an
exemption from such requirements.
S-25
UNDERWRITING
Subject to the terms and conditions in the underwriting
agreement between us and Morgan Stanley & Co.
Incorporated and UBS Securities LLC, as representatives of the
underwriters named below, we have agreed to sell to each
underwriter, and each underwriter has severally and not jointly
agreed to purchase from us, the principal amount of notes set
forth opposite the names of the underwriters below:
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Principal
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Underwriter
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Amount of Notes
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Morgan Stanley & Co. Incorporated
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$
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UBS Securities LLC
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Total
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$
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The underwriting agreement provides that the underwriters
severally and not jointly agree to purchase all of the notes if
any of them are purchased. If an underwriter defaults, the
underwriting agreement provides that the purchase commitments of
the non-defaulting underwriters may be increased or the
underwriting agreement may be terminated.
The underwriters initially propose to offer the notes to the
public at the public offering price that appears on the cover
page of this prospectus supplement. The underwriters may offer
the notes to selected dealers at the public offering price minus
a concession of up to % of the
principal amount of the notes. In addition, the underwriters may
allow, and those selected dealers may reallow, a concession of
up to % of the principal amount of
the notes to certain other dealers. After the initial offering,
the underwriters may change the public offering price and any
other selling terms. The underwriters may offer and sell notes
through certain of their affiliates.
The following table shows the underwriting discounts and
commissions to be paid to the underwriters in connection with
this offering (expressed as a percentage of the principal amount
of the notes).
In the underwriting agreement, we have agreed that:
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we will pay our expenses related to the offering, which we
estimate will be $600,000; and
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we will indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or
contribute to payments that the underwriters may be required to
make in respect of those liabilities.
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The underwriters are offering the notes, subject to prior sale,
when, as and if issued to and accepted by them, subject to
approval of legal matters by their counsel, including the
validity of the notes, and other conditions contained in the
underwriting agreement, such as the receipt by the underwriters
of an officers certificate and legal opinions. The
underwriters reserve the right to withdraw, cancel or modify
offers to the public and to reject orders in whole or in part.
The notes are a new issue of securities, and there is currently
no established trading market for the notes. We do not intend to
apply for the notes to be listed on any securities exchange or
to arrange for the notes to be quoted on any quotation system.
The underwriters have advised us that they intend to make a
market in the notes, but they are not obligated to do so. The
underwriters may discontinue any market making in the notes at
any time in their sole discretion. Accordingly, we cannot assure
you that liquid trading markets will develop for the notes, that
you will be able to sell your notes at a particular time or that
the prices that you receive when you sell will be favorable.
In connection with the offering of the notes, the underwriters
may engage in over-allotment, stabilizing transactions and
syndicate covering transactions. Over-allotment involves sales
in excess of the offering size, which creates a short position
for the underwriters. Stabilizing transactions involve bids to
purchase the notes in the open market for the purpose of
pegging, fixing or maintaining the price of the notes.
Syndicate-covering
S-26
transactions involve purchases of the notes in the open market
after the distribution has been completed in order to cover
short positions. Stabilizing transactions and syndicate-covering
transactions may cause the price of the notes to be higher than
it would otherwise be in the absence of those transactions. If
the underwriters engage in stabilizing or syndicate-covering
transactions, they may discontinue them at any time.
Neither we nor any of the underwriters makes any representation
or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of
the notes. In addition, neither we nor any of the underwriters
makes any representation that the underwriters will engage in
these transactions or that these transactions, once commenced,
will not be discontinued without notice.
Other
Relationships
Some of the underwriters and their affiliates have engaged in,
and may in the future engage in, investment banking and other
commercial dealings in the ordinary course of business with us.
They have received customary fees and commissions for these
transactions.
Selling
Restrictions
United
Kingdom
Any invitation or inducement to engage in investment activity
(within the meaning of Section 21 of the Financial Services
and Markets Act 2000 (the FSMA)), in connection with
the issue or sale of the notes, has only been, and will only be,
communicated or caused to be communicated in circumstances in
which Section 21(1) of the FSMA does not apply to Old
Republic International Corporation.
Anything done in relation to the notes in, from or otherwise
involving the United Kingdom, has been, and may only be done, in
compliance with all applicable provisions of the FSMA.
This prospectus supplement is being distributed only to, and is
directed only at persons who are qualified investors
(as defined in the Prospectus Directive) and (i) investment
professionals falling within Article 19(5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005
(as amended) (the Order), or (ii) high net
worth bodies corporate, unincorporated associations and
partnerships and trustees of high value trusts as described in
Article 49(2)(a) to (d) of the Order or
(iii) other persons to whom it may be lawfully communicated
in accordance with the Order (all such persons together being
referred to as relevant persons). This prospectus
supplement must not be acted on or relied on in the United
Kingdom by persons who are not relevant persons. In the United
Kingdom, any investment activity to which this prospectus
supplement relates is only available to, and will be engaged in
only with, relevant persons.
European
Economic Area
This prospectus supplement has been prepared on the basis that
all offers of the notes in any Member State of the European
Economic Area which has implemented the Prospectus Directive
(each, a Relevant Member State) will be made
pursuant to an exemption under the Prospectus Directive, as
implemented in that Relevant Member State, from the requirement
to publish a prospectus for offers of the notes. Neither we nor
the underwriters have authorized, nor do we or they authorize,
the making of any offer of the notes in circumstances in which
an obligation arises for us or any underwriter to publish a
prospectus pursuant to the Prospectus Directive for such offer.
Accordingly, with effect from and including the date on which
the Prospectus Directive is implemented in each Relevant Member
State (the Relevant Implementation Date) no offer
has been made or will be made to the public in that Relevant
Member State of any of the notes other than:
(a) to any legal entity which is a qualified investor as
defined in the Prospectus Directive;
(b) to fewer than 100 or, if the Relevant Member State has
implemented the relevant provisions of the 2010 PD Amending
Directive, 150 natural or legal persons (other than
qualified investors, as defined in the Prospectus
Directive), as permitted under the Prospectus Directive subject
to obtaining the prior consent of the underwriters for any such
offer; or
(c) in any other circumstances falling within
Article 3(2) of the Prospectus Directive,
S-27
provided that no such offer of the notes shall result in a
requirement for us or any underwriter to publish a prospectus
pursuant to Article 3 of the Prospectus Directive.
For the purposes of this provision, the expression an
offer of securities to the public in relation to the
notes in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms
of the offer and the notes to be offered so as to enable an
investor to decide to purchase the notes, as the same may be
varied in that Relevant Member State by any measure implementing
the Prospectus Directive in that Relevant Member State. The
expression Prospectus Directive means Directive
2003/71/EC (and amendments thereto, including the 2010 PD
Amending Directive to the extent implemented in the Relevant
Member State) and includes any relevant implementing measure in
each Relevant Member State and the expression 2010 PD
Amending Directive means Directive 2010/73/EU.
Australia
This offering memorandum is not a formal disclosure document and
has not been, nor will be, lodged with the Australian Securities
and Investments Commission. It does not purport to contain all
information that an investor or their professional advisers
would expect to find in a prospectus or other disclosure
document (as defined in the Corporations Act 2001 (Australia))
for the purposes of Part 6D.2 of the Corporations Act 2001
(Australia) or in a product disclosure statement for the
purposes of Part 7.9 of the Corporations Act 2001
(Australia), in either case, in relation to the securities.
The securities are not being offered in Australia to
retail clients as defined in sections 761G and
761GA of the Corporations Act 2001 (Australia). This offering is
being made in Australia solely to wholesale clients
for the purposes of section 761G of the Corporations Act
2001 (Australia) and, as such, no prospectus, product disclosure
statement or other disclosure document in relation to the
securities has been, or will be, prepared.
This offering memorandum does not constitute an offer in
Australia other than to wholesale clients. By submitting an
application for our securities, you represent and warrant to us
that you are a wholesale client for the purposes of
section 761G of the Corporations Act 2001 (Australia). If
any recipient of this offering memorandum is not a wholesale
client, no offer of, or invitation to apply for, our securities
shall be deemed to be made to such recipient and no applications
for our securities will be accepted from such recipient. Any
offer to a recipient in Australia, and any agreement arising
from acceptance of such offer, is personal and may only be
accepted by the recipient. In addition, by applying for our
securities you undertake to us that, for a period of
12 months from the date of issue of the securities, you
will not transfer any interest in the securities to any person
in Australia other than to a wholesale client.
Hong
Kong
Our securities may not be offered or sold in Hong Kong, by means
of this prospectus or any document other than (i) to
professional investors within the meaning of the
Securities and Futures Ordinance (Cap.571, Laws of Hong Kong)
and any rules made thereunder, or (ii) in circumstances
which do not constitute an offer to the public within the
meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong),
or (iii) in other circumstances which do not result in the
document being a prospectus within the meaning of
the Companies Ordinance (Cap.32, Laws of Hong Kong). No
advertisement, invitation or document relating to our securities
may be issued or may be in the possession of any person for the
purpose of issue (in each case whether in Hong Kong or
elsewhere) which is directed at, or the contents of which are
likely to be accessed or read by, the public in Hong Kong
(except if permitted to do so under the securities laws of Hong
Kong) other than with respect to the securities which are or are
intended to be disposed of only to persons outside Hong Kong or
only to professional investors within the meaning of
the Securities and Futures Ordinance (Cap. 571, Laws of Hong
Kong) and any rules made thereunder.
S-28
Japan
Our securities have not been and will not be registered under
the Financial Instruments and Exchange Law of Japan (the
Financial Instruments and Exchange Law) and our securities will
not be offered or sold, directly or indirectly, in Japan, or to,
or for the benefit of, any resident of Japan (which term as used
herein means any person resident in Japan, including any
corporation or other entity organized under the laws of Japan),
or to others for re-offering or resale, directly or indirectly,
in Japan, or to a resident of Japan, except pursuant to an
exemption from the registration requirements of, and otherwise
in compliance with, the Financial Instruments and Exchange Law
and any other applicable laws, regulations and ministerial
guidelines of Japan.
Singapore
This document has not been registered as a prospectus with the
Monetary Authority of Singapore and in Singapore, the offer and
sale of our securities is made pursuant to exemptions provided
in sections 274 and 275 of the Securities and Futures Act,
Chapter 289 of Singapore (SFA). Accordingly,
this prospectus and any other document or material in connection
with the offer or sale, or invitation for subscription or
purchase, of our securities may not be circulated or
distributed, nor may our securities be offered or sold, or be
made the subject of an invitation for subscription or purchase,
whether directly or indirectly, to persons in Singapore other
than (i) to an institutional investor as defined in
Section 4A of the SFA pursuant to Section 274 of the
SFA, (ii) to a relevant person as defined in
section 275(2) of the SFA pursuant to Section 275(1)
of the SFA, or any person pursuant to Section 275(1A) of
the SFA, and in accordance with the conditions specified in
Section 275 of the SFA or (iii) otherwise pursuant to,
and in accordance with the conditions of, any other applicable
provision of the SFA, in each case subject to compliance with
the conditions (if any) set forth in the SFA. Moreover, this
document is not a prospectus as defined in the SFA. Accordingly,
statutory liability under the SFA in relation to the content of
prospectuses would not apply. Prospective investors in Singapore
should consider carefully whether an investment in our
securities is suitable for them.
Where our securities are subscribed or purchased under
Section 275 of the SFA by a relevant person which is:
(a) by a corporation (which is not an accredited investor
as defined in Section 4A of the SFA) the sole business of
which is to hold investments and the entire share capital of
which is owned by one or more individuals, each of whom is an
accredited investor; or
(b) for a trust (where the trustee is not an accredited
investor) whose sole purpose is to hold investments and each
beneficiary of the trust is an individual who is an accredited
investor,
shares of that corporation or the beneficiaries rights and
interest (howsoever described) in that trust shall not be
transferable for six months after that corporation or that trust
has acquired the shares under Section 275 of the SFA,
except:
(1) to an institutional investor (for corporations under
Section 274 of the SFA) or to a relevant person defined in
Section 275(2) of the SFA, or any person pursuant to an
offer that is made on terms that such shares of that corporation
or such rights and interest in that trust are acquired at a
consideration of not less than S$200,000 (or its equivalent in a
foreign currency) for each transaction, whether such amount is
to be paid for in cash or by exchange of securities or other
assets, and further for corporations, in accordance with the
conditions, specified in Section 275 of the SFA;
(2) where no consideration is given for the
transfer; or
(3) where the transfer is by operation of law.
In addition, investors in Singapore should note that the
securities acquired by them are subject to resale and transfer
restrictions specified under Section 276 of the SFA, and
they, therefore, should seek their own legal advice before
effecting any resale or transfer of their securities.
S-29
Switzerland
The Prospectus does not constitute an issue prospectus pursuant
to Article 652a or Article 1156 of the Swiss Code of
Obligations (CO) and the shares will not be listed
on the SIX Swiss Exchange. Therefore, the Prospectus may not
comply with the disclosure standards of the CO
and/or the
listing rules (including any prospectus schemes) of the SIX
Swiss Exchange. Accordingly, the shares may not be offered to
the public in or from Switzerland, but only to a selected and
limited circle of investors, which do not subscribe to the
shares with a view to distribution.
LEGAL
MATTERS
The validity of the notes offered hereby and certain other legal
matters will be passed upon for us by Locke Lord
Bissell & Liddell LLP, Chicago, Illinois. Certain
legal matters will be passed upon for the underwriters by Sidley
Austin llp, New
York, New York.
S-30
PROSPECTUS
Debt
Securities
Each time we offer debt securities using this prospectus, we
will provide specific terms of the debt securities, including
the offering price and any conversion features, in supplements
to this prospectus. The prospectus supplements may also add to,
update or change the information in this prospectus and will
also describe the specific manner in which we will offer the
debt securities. You should read the prospectus supplement and
this prospectus, along with the documents incorporated by
reference, prior to investing in our debt securities.
We may offer and sell the debt securities to or through
underwriters, dealers and agents, or directly to purchasers. The
names and compensation of any underwriters, dealers or agents
involved in the sale of debt securities will be described in a
prospectus supplement.
Our common stock is traded on the New York Stock Exchange under
the symbol ORI.
Investing in these debt
securities involves risks. You should carefully consider the
information under Risk Factors on page 2 of
this prospectus as well as the risk factors contained in other
documents incorporated by reference into this
prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is March 2, 2011.
ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement on
Form S-3
that we have filed with the Securities and Exchange Commission,
or the SEC, using a shelf registration for
continuous offering process. Under the shelf process, from time
to time, we may, but are not required to, sell the debt
securities offered in supplements to this prospectus in one or
more offerings.
This prospectus provides you with a general description of our
Company. Whenever we decide to offer the debt securities noted
on the cover page of this prospectus, we will provide you with a
prospectus supplement containing specific information about the
terms of the offering and the means of distribution. A
prospectus supplement may include other special considerations
applicable to that specific offering. A prospectus supplement
may also add, update or change information in this prospectus.
If there is any inconsistency between the information in this
prospectus and any prospectus supplement, you should rely on the
information in the prospectus supplement. You should read
carefully this prospectus and any prospectus supplement together
with the additional information described under the heading
Where You Can Find More Information.
In this prospectus and any prospectus supplement, unless
otherwise indicated, the terms Old Republic,
Company, registrant, we,
us and our refer to Old Republic
International Corporation and its consolidated subsidiaries.
OLD
REPUBLIC INTERNATIONAL CORPORATION
We are a Chicago based holding company engaged in the single
business of insurance underwriting. We conduct our operations
through a number of regulated insurance company subsidiaries
organized into three major segments, namely, our General
(property and liability insurance), Mortgage Guaranty, and
Title Insurance Groups. References herein to such groups
apply to our subsidiaries engaged in these respective segments
of business.
The insurance business is distinguished from most others in that
the prices (premiums) charged for various insurance products are
set without certainty of the ultimate benefit and claim costs
that will emerge or be incurred, often many years after issuance
and expiration of a policy. This basic fact casts us as a
risk-taking enterprise managed for the long run. We therefore
conduct our business with a primary focus on achieving favorable
underwriting results over cycles, and the maintenance of
financial soundness in support of our subsidiaries
long-term obligations to insurance beneficiaries. To achieve
these objectives, adherence to certain basic insurance risk
management principles is stressed, and asset diversification and
quality are emphasized. The underwriting principles encompass:
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Disciplined risk selection, evaluation, and pricing to reduce
uncertainty and adverse selection;
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Augmenting the predictability of expected outcomes through
insurance of the largest number of homogeneous risks as to each
type of coverage;
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Reducing the insurance portfolio risk profile through:
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diversification and spread of insured risks; and
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assimilation of uncorrelated asset and liability exposures
across economic sectors that tend to offset or counterbalance
one another; and
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Effectively managing gross and net limits of liability through
appropriate use of reinsurance.
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In addition to income arising from our basic underwriting and
related services functions, we earn significant investment
income from invested funds generated by those functions and from
shareholders capital. Our investment strategy aims for
stability of income from interest and dividends, protection of
capital, and sufficient liquidity to meet insurance underwriting
and other obligations as they become payable in the future.
Securities trading and the realization of capital gains are not
objectives. Our investment philosophy is therefore best
characterized as emphasizing value, credit quality, and
relatively long-term holding periods. Our ability to
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hold both fixed maturity and equity securities for long periods
of time is in turn enabled by the scheduling of maturities in
contemplation of an appropriate matching of assets and
liabilities.
In light of the above factors, our affairs are managed without
regard to the arbitrary strictures of quarterly or even annual
reporting periods that American industry must observe. In our
view, such short reporting time frames do not comport well with
the long-term nature of much of our business. We believe that
our operating results and financial condition can best be
evaluated by observing underwriting and overall operating
performance trends over succeeding five to ten year intervals.
Such extended periods can encompass one or two economic
and/or
underwriting cycles, and thereby provide appropriate time frames
for such cycles to run their course and for reserved claim costs
to be quantified with greater finality and effect.
We are a corporation organized under the laws of Delaware. Our
principal executive offices are located at 307 North Michigan
Avenue, Chicago, Illinois. Information concerning us is
available on our website at oldrepublic.com. Information
contained on our website is not and should not be considered a
part of this prospectus unless specifically incorporated by
reference.
RISK
FACTORS
Investing in our debt securities involves risks. Potential
investors are urged to read and consider the risk factors
relating to an investment in our Company described in our most
recent Annual Report on
Form 10-K
incorporated by reference in this prospectus, as the same may be
updated from time to time by our future filings with the SEC.
Before making an investment decision, you should carefully
consider those risks as well as other information we incorporate
by reference in this prospectus. The risks and uncertainties we
have described are not the only ones facing our Company.
Additional risks and uncertainties not presently known to us or
that we currently consider immaterial may also adversely affect
our business operations. To the extent a particular offering
implicates additional risks, we will include a discussion of
those risks in the applicable prospectus supplement.
FORWARD-LOOKING
STATEMENTS
Historical data pertaining to the operating results, liquidity,
and other performance indicators applicable to an insurance
enterprise such as ours are not necessarily indicative of
results to be achieved in succeeding years. In addition to the
factors cited below, the long term nature of the insurance
business, seasonal and annual patterns in premium production and
incidence of claims, changes in yields obtained on invested
assets, changes in government policies and free markets
affecting inflation rates and general economic conditions, and
changes in legal precedents or the application of law affecting
the settlement of disputed and other claims can have a bearing
on period-to-period comparisons and future operating results.
Some of the statements made in our reports that we file with the
SEC and which are incorporated by reference in this prospectus
or that may be made in any applicable prospectus supplement can
constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Of necessity, any such forward-looking statements involve
assumptions, uncertainties, and risks that may affect our future
performance. With regard to our General Insurance segment, its
results can be affected, in particular, by the level of market
competition, which is typically a function of available capital
and expected returns on such capital among competitors, the
levels of interest and inflation rates, and periodic changes in
claim frequency and severity patterns caused by natural
disasters, weather conditions, accidents, illnesses,
work-related injuries, and unanticipated external events.
Mortgage Guaranty and Title Insurance results can be
affected by similar factors and by changes in national and
regional housing demand and values, the availability and cost of
mortgage loans, employment trends, and default rates on mortgage
loans. Mortgage Guaranty results, in particular, may also be
affected by various risk-sharing arrangements with business
producers as well as the risk management and pricing policies of
government sponsored enterprises. Life and health insurance
earnings can be affected by the levels of employment and
consumer spending, variations in mortality and health trends,
and changes in policy lapsation rates. At our parent holding
company level, operating earnings or losses are generally
reflective of the amount of debt outstanding and its cost,
interest income on
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temporary holdings of short-term investments, and
period-to-period variations in the costs of administering our
widespread operations.
A more detailed listing and discussion of the risks and other
factors which affect our risk-taking insurance business are
included in Part I, Item 1A Risk Factors,
of our 2010 Annual Report to the SEC, which Item is specifically
incorporated herein by reference.
Any forward-looking statements or commentaries speak only as of
their dates. We undertake no obligation to publicly update or
revise any and all such comments, whether as a result of new
information, future events or otherwise, and accordingly they
may not be unduly relied upon.
You should consider these risks and those set forth in, or
incorporated into, the Risk Factors section of this
prospectus prior to investing in our debt securities.
USE OF
PROCEEDS
Unless otherwise indicated in a prospectus supplement, the net
proceeds from the sale of debt securities offered by this
prospectus will be used for general corporate purposes,
including, without limitation, the repayment or the refinancing
of indebtedness, repurchases of our outstanding securities,
capital expenditures, future acquisitions and working capital.
If net proceeds from a specific offering will be used to repay
indebtedness, the applicable prospectus supplement will describe
the relevant terms of the debt to be repaid.
RATIO OF
EARNINGS TO FIXED CHARGES
The following table shows our historical ratio of earnings to
fixed charges for each of the five most recent fiscal years
ended December 31, 2010.
Our ratios of earnings to fixed charges for the periods
indicated are as follows :
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Year Ended December 31,
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2010
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2009
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2008
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2007
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2006
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Ratio of earnings to fixed charges
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1.92
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NM(1
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NM(1
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56.10
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71.26
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Not meaningful. For the years ended December 31, 2008 and
2009, earnings were insufficient to cover fixed charges by
$794.8 million and $270.7 million, respectively. Such
shortfalls were due primarily to the weakness in the
Companys mortgage guaranty and consumer credit indemnity
lines. 2008 was further negatively impacted by other than
temporary impairments of invested assets. |
For purposes of computing these ratios, earnings consist of the
sum of pretax income (loss) before adjustment for income or loss
from equity investees, distributed income of equity investees
and fixed charges. Fixed charges consist of interest expense and
amortization of capitalized debt expenses.
DESCRIPTION
OF DEBT SECURITIES
We will describe the terms of the offered debt securities from
time to time in any prospectus supplement for such offer.
PLAN OF
DISTRIBUTION
The plan of distribution for each offering of debt securities
pursuant to this prospectus will be described in detail in a
prospectus supplement describing each particular offering.
LEGAL
MATTERS
Unless otherwise indicated in the applicable prospectus
supplement, the validity of the offered debt securities of Old
Republic International Corporation will be passed on for us by
Spencer LeRoy, III, Senior
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Vice President, General Counsel, and Secretary of the
corporation. Mr. LeRoy holds stock and options to purchase
stock granted under our employee stock plans, which in the
aggregate represent less than 1% of our outstanding common stock.
EXPERTS
The consolidated financial statements and financial statement
schedules of Old Republic International Corporation as of and
for the year ended December 31, 2010, and managements
assessment of the effectiveness of internal control over
financial reporting as of December 31, 2010 have been
incorporated by reference herein and in the registration
statement in reliance upon the reports of KPMG LLP, independent
registered public accounting firm, incorporated by reference
herein, and upon the authority of said firm as experts in
accounting and auditing.
The financial statements and financial statement schedules as of
and for each of the two years in the period ended
December 31, 2009 incorporated in this prospectus by
reference to the Annual Report on
Form 10-K
for the year ended December 31, 2010 have been so
incorporated in reliance on the reports of
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any
reports, statements, or other information that we file at the
SECs Public Reference Room at 100 F Street,
N.E., Room 1580, Washington, DC 20549. Please call the SEC
at 1 800-SEC-0330 for further information on the Public
Reference Room in Washington, DC and in other locations. Our SEC
filings are also available to the public from commercial
document retrieval services and at the Internet Website
maintained by the SEC at
http://www.sec.gov.
Copies of documents we have filed with the SEC are also
available at the offices of the New York Stock Exchange, 200
Broad Street, New York, NY 10005.
INCORPORATION
BY REFERENCE
The rules of the SEC allow us to incorporate by reference
information into this prospectus. The information incorporated
by reference is considered to be a part of this prospectus, and
information that we file later with the SEC will automatically
update and supersede this information.
The following documents filed with the SEC are incorporated by
reference in this prospectus:
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Our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010, filed on
February 28, 2011;
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The sections of our Definitive Proxy Statement for the 2010
Annual Meeting of Shareholders filed with the SEC on
April 13, 2010 that are incorporated by reference in our
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009; and
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The description of our common stock contained in (i) our
registration statement on
Form 8-A
filed with the Securities and Exchange Commission on
August 29, 1990, as amended on August 31, 1990, and as
further amended on September 10, 1990; and (ii) our
registration statement on
Form 8-A
filed with the Securities and Exchange Commission on
September 10, 1990, as amended on May 30, 1997, as
further amended on June 20, 2007, and as further amended on
November 19, 2007.
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All reports and other documents filed by us pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, subsequent to the date hereof
and prior to the completion of the offering of all securities
covered by the respective prospectus supplement, shall be deemed
to be incorporated by reference in this prospectus and to be
part of this prospectus from the date of filing of such reports
and documents.
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Any statement contained in a document incorporated or deemed to
be incorporated by reference shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a
statement in this prospectus or in any other subsequently filed
document which is incorporated or deemed to be incorporated by
reference modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this
prospectus.
In reviewing any agreements incorporated by reference, please
remember they are included to provide you with information
regarding the terms of such agreement and are not intended to
provide any other factual or disclosure information about our
Company. The agreements may contain representations and
warranties by us, which should not in all instances be treated
as categorical statements of fact, but rather as a way of
allocating the risk to one of the parties if those statements
prove to be inaccurate. The representations and warranties were
made only as of the date of the relevant agreement or such other
date or dates as may be specified in such agreement and are
subject to more recent developments. Accordingly, these
representations and warranties alone may not describe the actual
state of affairs as of the date they were made or at any other
time.
You may obtain any of the documents incorporated by reference by
contacting us or the SEC or through the SECs Internet
Website, as described above. Documents incorporated by reference
are available from us without charge, excluding all exhibits
unless specifically incorporated by reference as an exhibit to
this prospectus or a prospectus supplement. You may obtain
documents incorporated by reference into this prospectus by
requesting them in writing or by telephone from us at the
following address: Old Republic International Corporation, 307
North Michigan Avenue, Chicago, Illinois 60601, Attention:
Corporate Secretary, telephone
(312) 346-8100.
We have not authorized anyone to give any information or make
any representation about the offering or us that is different
from, or in addition to, that contained in this prospectus or in
any of the materials that have been incorporated in this
prospectus or which may be contained in a prospectus supplement
or in any free writing prospectus prepared by us or on our
behalf. Therefore, if anyone does give you information of this
sort, you should not rely on it. If you are in a jurisdiction
where offers to exchange or sell, or solicitation of offers to
exchange or purchase, the securities offered by this prospectus
are unlawful, or if you are a person to whom is it unlawful to
direct these types of activities, then the offer presented in
this prospectus does not extend to you. Information contained in
this prospectus speaks only as of the date of this prospectus
unless otherwise specifically indicated.
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$250,000,000
% Senior Notes due
2021
PROSPECTUS SUPPLEMENT
Morgan Stanley
UBS Investment Bank
March , 2011