424B2
|
|
|
|
|
Filed Pursuant to Rule 424(b)(2) |
|
|
Registration Statement No. 333-153353-03 |
The registrant is updating the Calculation of Registration Fee table set forth in the Registration Statement on Form S-3 (Registration No. 333-153353-03) to indicate the
$500,000,000 aggregate offering price of securities offered hereby and the filing fee of $19,650, calculated in accordance with Rule 457(r). This filing fee is offset by amounts previously
paid with respect to unsold securities ($5,250) that were registered under the Registration Statement on Form S-3 (Registration No. 333-120611) initially filed with the Securities and
Exchange Commission on November 18, 2004. In addition, this filing fee is offset by amounts previously paid with respect to the registrants parent, CMS Energy Corporations,
unsold securities ($114,757.50) that were registered under the Registration Statement on Form S-3 (Registration No. 333-125553) filed on June 6, 2005. Accordingly, no filing fee is
paid herewith, and the unused portion of the previously paid filing fee by CMS Energy Corporation is reduced to $100,357.50.
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 5, 2008
$500,000,000
Consumers Energy Company
6.70% First Mortgage Bonds due 2019
We are offering $500,000,000 of our 6.70% First Mortgage Bonds due 2019, referred to as the
Bonds.
The Bonds will bear interest at the rate of 6.70% per year. Interest on the Bonds is payable
semi-annually in arrears on March 15 and September 15, commencing on September 15, 2009, and on the
date of maturity. The Bonds will mature on September 15, 2019. We may redeem some or all of the
Bonds at our option at any time at 100% of their principal amount, plus any applicable premium
thereon at the time of redemption, plus accrued and unpaid interest to the redemption date. See
Description of the Bonds Optional Redemption.
The Bonds will be issued only in denominations of $1,000 and integral multiples of $1,000.
The Bonds will rank equally in right of payment with our other existing or future first mortgage
bonds issued either independently or as collateral for outstanding or future indebtedness.
This investment involves risk. See Risk Factors beginning on page S-7.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal
offense.
|
|
|
|
|
|
|
|
|
|
|
Per Bond |
|
Total |
Public Offering Price |
|
|
99.952 |
% |
|
$ |
499,760,000 |
|
Underwriting Discount |
|
|
0.650 |
% |
|
$ |
3,250,000 |
|
Proceeds to Consumers (before expenses) |
|
|
99.302 |
% |
|
$ |
496,510,000 |
|
Interest on the Bonds will accrue from March 6, 2009 to date of delivery.
The underwriters expect to deliver the Bonds through the book-entry facilities of The
Depository Trust Company in New York City on or about March 6, 2009 against payment therefor.
Joint Book-Running Managers
|
|
|
|
|
Barclays Capital
|
J.P. Morgan |
BNP PARIBAS
|
|
Scotia Capital
|
|
SunTrust Robinson Humphrey |
|
|
|
|
|
|
|
|
|
|
Comerica Securities
|
|
RBS Greenwich Capital
|
|
KeyBanc Capital Markets |
Wedbush Morgan Securities Inc.
|
|
|
|
|
|
|
|
|
|
Blaylock Robert Van, LLC
|
|
Fifth Third Securities
|
|
The Williams Capital Group, L.P. |
The date of this prospectus supplement is March 2, 2009.
TABLE OF CONTENTS
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Page |
Prospectus Supplement |
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S-2 |
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S-3 |
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S-4 |
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S-7 |
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S-8 |
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S-8 |
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S-9 |
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S-10 |
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S-16 |
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S-16 |
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S-17 |
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S-17 |
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3 |
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3 |
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3 |
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4 |
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5 |
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5 |
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6 |
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6 |
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7 |
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38 |
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40 |
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40 |
You should rely only on the information contained in or incorporated by reference in this
prospectus supplement and the accompanying prospectus or to documents to which we have referred
you. We have not authorized anyone to provide you with different information. We are not, and the
underwriters are not, making an offer of these securities in any jurisdiction where the offer is
not permitted. This document may only be used where it is legal to sell these securities. You
should not assume that the information contained in this prospectus supplement and the accompanying
prospectus is accurate as of any date other than the date on the front of each such document.
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is this prospectus supplement, which describes
the terms of this offering of the Bonds and also adds to and updates information contained in the
accompanying prospectus and the documents incorporated by reference into the accompanying
prospectus. The second part is the accompanying prospectus, which contains a description of the
securities registered by us, including the first mortgage bonds, of which the Bonds are a series.
To the extent there is a conflict between the information contained or incorporated by reference in
this prospectus supplement, on the one hand, and the information contained in the accompanying
prospectus or any document incorporated by reference therein, on the other hand, the information in
this prospectus supplement shall control.
This prospectus supplement and the accompanying prospectus are part of a registration
statement that we filed jointly with our parent, CMS Energy Corporation (CMS Energy), with the
Securities and Exchange Commission (SEC) using a shelf registration process as a well-known
seasoned issuer. Under the registration statement, we may sell securities, including Bonds, of
which this offering is a part.
S-2
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange Act of 1934, as
amended (the Exchange Act), and, therefore, we are required to file reports, proxy statements and
other information with the SEC under File No. 1-5611. Our SEC filings are available over the
Internet at the SECs web site at http://www.sec.gov. You may also read and copy any document we
file at the SECs public reference room at 100 F Street, NE, Room 1580, Washington, DC, 20549.
Please call the SEC at 1-800-SEC-0330 for more information on the public reference rooms and their
copy charges. You may also inspect our SEC reports and other information at the New York Stock
Exchange, 20 Broad Street, New York, New York, 10005. You can find additional information about
us, including our Annual Report on Form 10-K for the year ended December 31, 2008, on the web site
of our parent company at http://www.cmsenergy.com. The information on this web site is not a part
of this prospectus supplement and the accompanying prospectus.
We are incorporating by reference information into this prospectus supplement and the
accompanying prospectus. This means that we are disclosing important information by referring to
another document filed separately with the SEC. The information incorporated by reference is
considered to be part of this prospectus supplement and the accompanying prospectus, except for any
information superseded by information in this prospectus supplement and the accompanying
prospectus. This prospectus supplement and the accompanying prospectus incorporate by reference
the documents set forth below that we have previously filed with the SEC. These documents contain
important information about us and our finances.
|
|
|
Annual Report on Form 10-K for the year ended December 31, 2008 filed on February 25, 2009 |
|
|
|
|
Current Report on Form 8-K filed on January 27, 2009 |
The documents filed by us with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus supplement, until the offering of the Bonds pursuant
to this prospectus supplement is terminated, are also incorporated by reference into this
prospectus supplement and the accompanying prospectus. Any statement contained in such document
will be deemed to be modified or superseded for purposes of this prospectus supplement and the
accompanying prospectus to the extent that a statement contained in this prospectus supplement and
the accompanying prospectus or any other subsequently filed document modifies or supersedes such
statement.
We will provide, upon your oral or written request, a copy of any or all of the information
that has been incorporated by reference in this prospectus supplement and the accompanying
prospectus but not delivered with this prospectus supplement and the accompanying prospectus. You
may request a copy of these filings at no cost by writing or telephoning us at the following
address:
Consumers Energy Company
One Energy Plaza
Jackson, Michigan 49201
Tel: (517) 788-0550
Attention: Office of the Secretary
S-3
SUMMARY
This summary may not contain all the information that may be important to you. You should
read carefully this prospectus supplement and the accompanying prospectus and the documents
incorporated by reference into this prospectus supplement and the accompanying prospectus in their
entirety before making an investment decision. The terms Consumers, Company, our, us, and
we as used in this document refer to Consumers Energy Company and its subsidiaries and
predecessors as a combined entity, except where it is made clear that such term means only
Consumers Energy Company. In this document, MW means megawatts.
Consumers Energy Company
Consumers, a wholly-owned subsidiary of CMS Energy, is a combination electric and gas utility
company that provides electricity and/or natural gas to customers in Michigans lower peninsula.
Consumers electric utility operations include the generation, purchase, distribution and sale of
electricity. As of December 31, 2008, Consumers electric utility was authorized to provide
electric utility service in 61 of the 68 counties in Michigans lower peninsula. At December 31,
2008, Consumers electric utility owned and operated 31 electric generating plants with an
aggregate of 6,536 MW of capacity. Consumers gas utility operations purchase, transport, store,
distribute and sell natural gas. As of December 31, 2008, Consumers gas utility was authorized to
provide gas utility service in 46 of the 68 counties in Michigans lower peninsula. At December
31, 2008, Consumers gas utility owned and operated 26,451 miles of distribution mains and 1,656
miles of transmission lines throughout Michigans lower peninsula. Consumers principal executive
offices are located at One Energy Plaza, Jackson, Michigan 49201, and Consumers telephone number
is (517) 788-0550.
Recent Developments
2008 Results of Operations
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Millions |
Years Ended December 31, |
|
2008 |
|
2007 |
|
Change |
|
Electric |
|
$ |
271 |
|
|
$ |
196 |
|
|
$ |
75 |
|
Gas |
|
|
89 |
|
|
|
87 |
|
|
|
2 |
|
Other (includes the MCV Partnership interest) |
|
|
2 |
|
|
|
27 |
|
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common Stockholder |
|
$ |
362 |
|
|
$ |
310 |
|
|
$ |
52 |
|
|
For 2008, Consumers net income available to its common stockholder was $362 million, compared
to $310 million for 2007. The increase reflects higher net income from Consumers electric utility
segment primarily due to rate increases authorized in December 2007 and June 2008 and reduced costs
associated with Consumers power purchase agreement with the Midland Cogeneration Venture Limited
Partnership (the MCV Partnership). Partially offsetting these increases was a decrease in
electric deliveries and increased depreciation expense.
Specific changes to net income available to Consumers common stockholder for 2008 versus 2007
are:
|
|
|
|
|
|
|
In Millions |
|
increase in electric delivery revenue primarily due to the Michigan Public Service
Commissions (MPSC) December 2007 and June 2008 electric rate orders; |
|
$ |
109 |
|
decrease in electric operating expense due to the absence, in 2008, of certain costs
that are no longer incurred under Consumers power purchase agreement with the MCV
Partnership; |
|
|
29 |
|
absence of nuclear operating and maintenance costs; |
|
|
25 |
|
increase in gas delivery revenue primarily due to the MPSCs August 2007 gas rate order; |
|
|
20 |
|
decrease in electric deliveries; |
|
|
(51 |
) |
decrease in other income; |
|
|
(48 |
) |
increase in depreciation expense; and |
|
|
(31 |
) |
other net decreases |
|
|
(1 |
) |
Total change |
|
$ |
52 |
|
|
|
|
|
S-4
The Offering
|
|
|
Issuer
|
|
Consumers Energy Company. |
|
|
|
Securities Offered
|
|
$500,000,000 aggregate principal amount of
6.70% First Mortgage Bonds due 2019 (the
Bonds) to be issued under the indenture dated
as of September 1, 1945 between us and The Bank
of New York Mellon (ultimate successor to City
Bank Farmers Trust Company), as trustee (the
Trustee), and as amended and supplemented
from time to time (the Indenture). |
|
|
|
Maturity
|
|
The Bonds mature on September 15, 2019. |
|
|
|
Interest Rate
|
|
The Bonds will bear interest at 6.70% per annum. |
|
|
|
Interest Payment Dates
|
|
Interest on the Bonds is payable semi-annually
on March 15 and September 15 of each year,
beginning September 15, 2009, and at maturity. |
|
|
|
Record Date for Interest Payments
|
|
The record date for interest payments on the
Bonds will be the first calendar day of the
month in which an interest payment date occurs. |
|
|
|
Use of Proceeds
|
|
We estimate that the net proceeds from the sale
of the Bonds, after deducting offering
discounts but before deducting offering
expenses, will be $496,510,000. We will use
the net proceeds of the offering of the Bonds
for general corporate purposes. |
|
|
|
Ratings
|
|
BBB by Standard & Poors Ratings Group, a
division of The McGraw-Hill Companies, Inc.
(S&P), Baa1 by Moodys Investors Service,
Inc. (Moodys) and BBB+ by Fitch, Inc.
(Fitch). Note that a securities rating is
not a recommendation to buy, sell or hold
securities and may be subject to revision or
withdrawal at any time. |
|
|
|
Ranking
|
|
The Bonds will rank equally in right of payment
with our other existing or future first
mortgage bonds issued either independently or
as collateral for outstanding or future
securities or loans. |
|
|
|
Mandatory Redemption
|
|
None. |
|
|
|
Optional Redemption
|
|
The Bonds will be redeemable at our option, in
whole or in part, at any time, on not less than
30 days nor more than 60 days notice at a price
equal to 100% of the principal amount of the
Bonds to be redeemed plus any accrued and
unpaid interest, and applicable premium owed,
if any, to the redemption date. See
Description of the Bonds Optional
Redemption. |
|
|
|
Form of Bonds
|
|
One or more global securities held in the name
of The Depository Trust Company (DTC) in a
minimum denomination of $1,000 and any integral
multiple thereof. |
|
|
|
Trustee and Paying Agent
|
|
The Bank of New York Mellon. |
|
|
|
Risk Factors
|
|
You should carefully consider each of the
factors referred to or as described in the
section of this prospectus supplement entitled
Risk Factors starting on page S-7, including
the Risk Factors section in our Annual Report
on Form 10-K for the fiscal year ended December
31, 2008, before purchasing the Bonds. |
S-5
Selected Historical Consolidated Financial Data
The following selected historical consolidated financial data for the fiscal years ended
December 31, 2008 and 2007 have been derived from our audited consolidated financial statements,
which have been audited by PricewaterhouseCoopers LLP, independent registered public accounting
firm. The following selected historical consolidated financial data for the fiscal years ended
December 31, 2004 through December 31, 2006 have been derived from our audited consolidated
financial statements, which have been audited by Ernst & Young LLP, independent registered public
accounting firm, except for the amounts included from the consolidated financial statements of the
MCV Partnership. The MCV Partnership, a 49% owned variable interest entity which we sold in
November 2006, was consolidated in our financial statements beginning in 2004 through the date of
sale and was audited by PricewaterhouseCoopers LLP for all periods through the date of sale. The
financial information set forth below is qualified by and should be read in conjunction with our
consolidated financial statements, related notes and other financial information also incorporated
by reference in this prospectus supplement. See Where You Can Find More Information. For
selected balance sheet information, see Capitalization.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2008 |
|
2007 |
|
2006 |
|
2005 |
|
2004 |
|
|
(In millions) |
Income Statement Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
6,421 |
|
|
$ |
6,064 |
|
|
$ |
5,721 |
|
|
$ |
5,232 |
|
|
$ |
4,711 |
|
Earnings from equity method investees |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
Income (loss) before cumulative effect of change in
accounting principle |
|
|
364 |
|
|
|
312 |
|
|
|
186 |
|
|
|
(96 |
) |
|
|
280 |
|
Cumulative effect of change in accounting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
Net income (loss) |
|
|
364 |
|
|
|
312 |
|
|
|
186 |
|
|
|
(96 |
) |
|
|
279 |
|
Net income (loss) available to common stockholder |
|
|
362 |
|
|
|
310 |
|
|
|
184 |
|
|
|
(98 |
) |
|
|
277 |
|
Balance Sheet Data (At Period End Date): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets (a) |
|
|
14,246 |
|
|
|
13,401 |
|
|
|
12,845 |
|
|
|
13,178 |
|
|
|
12,811 |
|
Long-term debt, excluding current portion (a) |
|
|
3,908 |
|
|
|
3,692 |
|
|
|
4,127 |
|
|
|
4,303 |
|
|
|
4,000 |
|
Long-term debtrelated parties, excluding current portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
326 |
|
Non-current portion of capital and finance lease obligations |
|
|
206 |
|
|
|
225 |
|
|
|
42 |
|
|
|
308 |
|
|
|
315 |
|
Total preferred stock |
|
|
44 |
|
|
|
44 |
|
|
|
44 |
|
|
|
44 |
|
|
|
44 |
|
Cash Flow or Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operations |
|
|
873 |
|
|
|
440 |
|
|
|
474 |
|
|
|
639 |
|
|
|
595 |
|
Capital expenditures, excluding capital lease additions |
|
|
789 |
|
|
|
1,258 |
|
|
|
646 |
|
|
|
572 |
|
|
|
508 |
|
|
|
|
(a) |
|
Until their sale in November 2006, we were the primary beneficiary of both the MCV
Partnership and the First Midland Limited Partnership. As a result, we consolidated their
assets, liabilities and activities into our consolidated financial statements as of and for
the years ended December 31, 2005 and 2004. These partnerships had third party obligations
totaling $482 million at December 31, 2005 and $582 million at December 31, 2004. Property,
plant and equipment serving as collateral for these obligations had a carrying value of $224
million at December 31, 2005 and $1.426 billion at December 31, 2004. |
S-6
RISK FACTORS
An investment in the Bonds involves a significant degree of risk. You should carefully
consider the following risk factors, together with all of the other information included or
incorporated by reference in this prospectus supplement. In particular, you should carefully
consider the factors listed in Managements Discussion and AnalysisForward-Looking Statements and
Information as well as the Risk Factors contained in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2008, which is incorporated by reference into this prospectus
supplement, before you decide to purchase the Bonds. This prospectus supplement, the accompanying
prospectus and the documents that we incorporate or that are deemed to be incorporated in this
prospectus supplement or the accompanying prospectus, and other written and oral statements that we
make contain forward-looking statements as defined by the Private Securities Litigation Reform Act
of 1995 and relevant legal decisions. Our intention with the use of such words as may, could,
anticipates, believes, estimates, expects, intends, plans and other similar words is to
identify forward-looking statements that involve risk and uncertainty. We have no obligation to
update or revise any forward-looking statements regardless of whether new information, future
events or any other factors affect the information contained in the statements. The risks and
uncertainties described below and those incorporated from the referenced Annual Report on Form 10-K
are not the only ones we may confront. Additional risks and uncertainties not currently known to
us or that we currently deem not material also may impair our business operations. If any of those
risks actually occur, our financial condition, operating results and prospects could be materially
adversely affected. This section contains forward-looking statements.
We cannot assure you that an active trading market will develop for the Bonds.
The Bonds will constitute a new series of securities with no established trading market. As
we do not intend to apply to list the Bonds for trading on any national securities exchange or to
include the Bonds in any automated quotation system, we cannot assure you that an active trading
market for the Bonds will develop or as to the liquidity or sustainability of any such market, the
ability of holders of the Bonds to sell their Bonds or the price at which holders of the Bonds will
be able to sell their Bonds. Future trading prices of the Bonds will also depend on many other
factors, including, among other things, prevailing interest rates, the market for similar
securities, the ratings of the Bonds from time to time, our performance and other factors.
If the ratings of the Bonds are lowered or withdrawn, the market value of the Bonds could
decrease.
A rating is not a recommendation to purchase, hold or sell the Bonds, inasmuch as the rating
does not comment as to market price or suitability for a particular investor. The ratings of the
Bonds address the likelihood of the timely payment of interest and the ultimate repayment of
principal of the Bonds pursuant to their respective terms. There is no assurance that a rating
will remain for any given period of time or that a rating will not be lowered or withdrawn entirely
by a rating agency if in its judgment circumstances in the future so warrant. In the event that
any of the ratings initially assigned to the Bonds is subsequently lowered or withdrawn for any
reason, you may not be able to resell your Bonds without a substantial discount.
We may choose to redeem the Bonds prior to maturity.
We may redeem all or a portion of the Bonds at any time. See Description of the Bonds
Optional Redemption. If prevailing interest rates are lower at the time of redemption, you may
not be able to reinvest the redemption proceeds in a comparable security at an interest rate as
high as the interest rate of the Bonds being redeemed.
S-7
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the Bonds, after deducting offering
discounts but before deducting offering expenses, will be $496,510,000. We will use the net
proceeds of the offering of the Bonds for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for each of the years ended December 31, 2004 through
2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2008 |
|
2007 |
|
2006 |
|
2005 |
|
2004 |
Ratio of earnings to fixed charges: (a) |
|
|
3.04 |
|
|
|
2.49 |
|
|
|
1.54 |
|
|
|
|
(b) |
|
|
2.27 |
|
|
|
|
(a) |
|
For purposes of computing the ratio, earnings represent the sum of pretax income, net
interest charges and the estimated interest portions of lease rentals, plus distributed income
of equity investees less earnings from equity investees. |
|
(b) |
|
For the year ended December 31, 2005, fixed charges exceeded earnings by $591 million.
Earnings as defined include asset impairment charges of $1.184 billion. |
See Exhibit 12(b) to Consumers Annual Report on Form 10-K for the fiscal year ended December
31, 2008 for the items constituting earnings and fixed charges, including the estimated interest
portion of lease rental in respect of fixed charges.
S-8
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 2008 on an actual basis
and as adjusted to reflect the sale of $500,000,000 of Bonds in this offering and the application
of the net proceeds as described under Use of Proceeds. This table should be read in conjunction
with Selected Historical Consolidated Financial Data contained in this prospectus supplement and
our consolidated financial statements and related notes and other financial information also
incorporated by reference in this prospectus supplement. See Where You Can Find More
Information.
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008 |
|
|
|
Actual |
|
|
As Adjusted |
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
(In millions) |
|
Common stockholders equity |
|
$ |
3,705 |
|
|
$ |
3,705 |
|
Preferred stock |
|
|
44 |
|
|
|
44 |
|
Long-term debt: |
|
|
|
|
|
|
|
|
6.70% First Mortgage Bonds due 2019 |
|
|
|
|
|
|
500 |
|
Other long-term debt (excluding current maturities) |
|
|
3,908 |
|
|
|
3,908 |
|
Non-current portion of capital and finance lease obligations |
|
|
206 |
|
|
|
206 |
|
|
|
|
|
|
|
|
Total capitalization |
|
$ |
7,863 |
|
|
$ |
8,363 |
|
Current portion of long-term debt, capital and finance lease
obligations |
|
|
408 |
|
|
|
408 |
|
|
|
|
|
|
|
|
Total capitalization and current portion of long-term
debt, capital and finance lease obligations |
|
$ |
8,271 |
|
|
$ |
8,771 |
|
|
|
|
|
|
|
|
S-9
DESCRIPTION OF THE BONDS
General
The Bonds are to be issued under an Indenture dated as of September 1, 1945, between Consumers
and The Bank of New York Mellon (ultimate successor to City Bank Farmers Trust Company), as
trustee, as amended and supplemented by various supplemental indentures and as supplemented by the
111th Supplemental Indenture dated as of March 6, 2009. In connection with the change of the state
of incorporation from Maine to Michigan in 1968, Consumers succeeded to, and was substituted for,
the Maine corporation under the Indenture. At January 31, 2009, 14 series of first mortgage bonds
in an aggregate principal amount of approximately $3.517 billion were outstanding under the
Indenture, excluding four series of first mortgage bonds in an approximate aggregate principal
amount of $1.03 billion to secure outstanding senior notes and credit facilities and two series of
first mortgage bonds in an approximate aggregate principal amount of $57.9 million to secure
outstanding pollution control and solid waste revenue bonds.
The statements herein concerning the Bonds and the Indenture are a summary and do not purport
to be complete and are subject to, and qualified in their entirety by, all of the provisions of the
Indenture, which is incorporated herein by this reference. They make use of defined terms and are
qualified in their entirety by express reference to the Indenture, including the 111th Supplemental
Indenture, copies of which will be made available upon request to the Trustee.
Principal, Maturity and Interest
The Bonds are initially being offered in the aggregate principal amount of $500,000,000. The
Indenture permits Consumers to re-open this issuance of Bonds without the consent of the holders
of the Bonds. Accordingly, the principal amount of the Bonds may be increased in the future on the
same terms and conditions and with the same CUSIP numbers as the Bonds being offered by this
prospectus supplement. The Bonds will mature on September 15, 2019 unless earlier redeemed or
otherwise repaid. The Bonds will bear interest at a rate of 6.70% per year, payable semi-annually
in arrears on March 15 and September 15 of each year and at the date of maturity. Interest is
payable to the person in whose name the Bonds are registered at the close of business on the first
calendar day of the month in which the interest payment date occurs. The initial interest payment
date for the Bonds will be September 15, 2009. Interest payable on the Bonds on any interest
payment date or on the date of maturity will be the amount of interest accrued from and including
the date of original issuance or from and including the most recent interest payment date on which
interest has been paid or duly made available for payment to but excluding such interest payment
date or the date of maturity, as the case may be. So long as the Bonds are in book-entry form,
principal of and interest on the Bonds will be payable, and the Bonds may be transferred, only
through the facilities of DTC. If any interest payment date for the Bonds falls on a day that is
not a business day, the interest payment date will be the next succeeding business day (and without
any interest or other payment in respect of any such delay). Interest on the Bonds will be
computed on the basis of a 360-day year consisting of twelve 30-day months.
Registration, Transfer and Exchange
The Bonds will be initially issued in the form of one or more bonds, in registered form,
without coupons (Global Bonds), in denominations of $1,000 and any integral multiple thereof as
described under Book-Entry Only Issuance The Depository Trust Company. The Global Bonds will
be registered in the name of the nominee of DTC. Except as described under Book-Entry Only
Issuance The Depository Trust Company, owners of beneficial interests in a Global Bond will not
be entitled to have Bonds registered in their names, will not receive or be entitled to receive
physical delivery of any such Bond and will not be considered the registered holder thereof under
the Indenture.
Optional Redemption
The Bonds will be redeemable at Consumers option, in whole or in part, at any time or from
time to time, at a redemption price equal to 100% of the principal amount of such Bonds being
redeemed plus the Applicable Premium (as defined below), if any, thereon at the time of redemption,
together with accrued interest, if any, thereon to the redemption date. In no event will the
redemption price be less than 100% of the principal amount of the Bonds plus accrued interest, if
any, thereon to the redemption date.
The following definitions are used to determine the Applicable Premium:
Applicable Premium means, with respect to a Bond (or portion thereof) being redeemed at any
time, the excess of (A) the present value at such time of the principal amount of such Bond (or
portion thereof) being redeemed plus all scheduled interest payments on such Bond (or portion
thereof excluding interest accrued to the redemption date) after the redemption date, which present
S-10
value shall be computed using a discount rate equal to the Treasury Rate (as defined below)
plus 50 basis points, over (B) the principal amount of such Bond (or portion thereof) being
redeemed at such time. For purposes of this definition, the present values of interest and
principal payments will be determined in accordance with generally accepted principles of financial
analysis.
Treasury Rate means the yield to maturity at the time of computation of United States
Treasury securities adjusted to constant maturity under the caption Treasury constant maturities,
Nominal (as compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) (the Statistical Release)) which has become publicly available at least two business
days prior to the redemption date (or, if such Statistical Release is no longer published, any
publicly available source of similar market data) most nearly equal to the then remaining average
life to stated maturity of the Bonds; provided, however, that if the average life (rounded to the
first decimal point) to stated maturity of the Bonds is not equal to the constant maturity of a
United States Treasury security for which a weekly average yield (in the Statistical Release
columns labeled Week Ending) is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of
United States Treasury securities for which such yields are given.
The Treasury Rate will be calculated on the third business day preceding the date fixed for
redemption.
If the original redemption date is on or after a record date and on or before the relevant
interest payment date, the accrued and unpaid interest, if any, will be paid to the person or
entity in whose name the Bond is registered at the close of business on the record date, and no
additional interest will be payable to the holders whose Bonds shall be subject to redemption.
If less than all of the Bonds are to be redeemed, the Trustee shall select, in such manner as
it shall deem appropriate and fair, the particular Bonds or portions thereof to be redeemed.
Notice of redemption shall be given by mail not less than 30 nor more than 60 days prior to the
date fixed for redemption to the holders of the Bonds to be redeemed (which, as long as the Bonds
are held in the book-entry system, will be DTC (or its nominee) or a successor depositary);
provided, however, that the failure to duly give such notice by mail, or any defect therein, shall
not affect the validity of any proceedings for the redemption of the Bonds as to which there shall
have been no such failure or defect. On and after the date fixed for redemption (unless Consumers
shall default in the payment of the Bonds or portions thereof to be redeemed at the applicable
redemption price, together with accrued interest, if any, thereon to such date), interest on the
Bonds or the portions thereof so called for redemption shall cease to accrue.
Sinking Fund Requirement
The Bonds will not have the benefit of any sinking fund.
Issuance of Additional First Mortgage Bonds
Additional first mortgage bonds may be issued under the Indenture in principal amount of up to
60% of unfunded net property additions or against the deposit of an equal amount of cash, if, for
any period of twelve consecutive months within the fifteen preceding calendar months, the net
earnings of Consumers (before income or excess profit taxes) shall have been at least twice the
interest requirement for one year on all first mortgage bonds outstanding and to be issued and on
indebtedness of prior or equal rank. Additional first mortgage bonds may also be issued to refund
first mortgage bonds outstanding under the Indenture. Deposited cash may be applied to the
retirement of first mortgage bonds or be withdrawn in an amount equal to the principal amount of
first mortgage bonds which may be issued on the basis of unfunded net property additions. Such
future issuances are also subject to certain other requirements set forth in the Indenture. As of
December 31, 2008, unfunded net property additions were $3.565 billion, and Consumers could issue
$2.139 billion of additional first mortgage bonds on the basis of such property additions. In
addition, as of February 28, 2009, Consumers could issue $235 million of additional first mortgage
bonds on the basis of first mortgage bonds previously retired.
The Bonds are to be issued upon the basis of unfunded net property additions and retired
bonds.
Limitations on Dividends
The 111th Supplemental Indenture does not restrict Consumers ability to pay dividends on its
common stock.
S-11
Concerning the Trustee
The Bank of New York Mellon is the Trustee and paying agent under the Indenture. Consumers
and its affiliates maintain depository and other normal banking relationships with The Bank of New
York Mellon.
The Indenture provides that Consumers obligations to compensate the Trustee and reimburse the
Trustee for expenses, disbursements and advances will constitute indebtedness which will be secured
by a lien generally prior to that of the first mortgage bonds upon all property and funds held or
collected by the Trustee as such.
The Trustee or the holders of 20% in total principal amount of the first mortgage bonds may
declare the principal due on default, but the holders of a majority in total principal amount may
rescind such declaration and waive the default if the default has been cured. Subject to certain
limitations, the holders of a majority in total principal amount of the first mortgage bonds may
generally direct the time, method and place of conducting any proceeding for the enforcement of the
Indenture. No first mortgage bondholder has the right to institute any proceedings for the
enforcement of the Indenture unless that holder has given the Trustee written notice of a default,
the holders of 20% of total principal amount of outstanding first mortgage bonds shall have
tendered to the Trustee reasonable security or indemnity against costs, expenses and liabilities
and requested the Trustee to take action, the Trustee shall have declined to take action or failed
to do so within 60 days and no inconsistent directions shall have been given by the holders of a
majority in total principal amount of the first mortgage bonds.
Priority and Security
The Bonds are ranked equally with all other series of first mortgage bonds now outstanding or
issued later under the Indenture. The Indenture is a direct first lien on substantially all of
Consumers property and franchises (other than certain property expressly excluded from the lien
(such as cash, bonds, stock and certain other securities, contracts, accounts and bills
receivables, judgments and other evidences of indebtedness, stock in trade, materials or supplies
manufactured or acquired for the purpose of sale and/or resale in the usual course of business or
consumable in the operation of any of the properties of Consumers, natural gas, oil and minerals,
motor vehicles and certain real property listed in Schedule A to the Indenture)). This lien is
subject to excepted encumbrances (and certain other limitations) as defined and described in the
Indenture. The Bonds are also subject to certain provisions of Michigan law which provide that,
under certain circumstances, the State of Michigans lien against property on which it has incurred
costs related to any environmental response activity that is subordinate to prior recorded liens
can become superior to such prior liens pursuant to court order. The Indenture permits, with
certain limitations, the acquisition of property subject to prior liens and, under certain
conditions, permits the issuance of additional indebtedness under such prior liens to the extent of
60% of net property additions made by Consumers to the property subject to such prior liens.
Release and Substitution of Property
The Indenture provides that, subject to various limitations, property may be released from the
lien thereof when sold or exchanged, or contracted to be sold or exchanged, upon the basis of:
|
|
|
cash deposited with the Trustee; |
|
|
|
|
bonds or purchase money obligations delivered to the Trustee; |
|
|
|
|
prior lien bonds delivered to the Trustee or reduced or assumed by the purchaser; |
|
|
|
|
property additions acquired in exchange for the property released; or |
|
|
|
|
upon a showing that unfunded net property additions exist. |
The Indenture also permits the withdrawal of cash upon a showing that unfunded net property
additions exist or against the deposit of bonds or the application thereof to the retirement of
bonds.
Modification of Indenture
The Indenture, the rights and obligations of Consumers and the rights of the holders of first
mortgage bonds may be modified by Consumers with the consent of the holders of 75% in principal
amount of the first mortgage bonds and of not less than 60% of the
S-12
principal amount of each series affected. In general, however, no modification of the terms
of payment of principal or interest and no modification affecting the lien or reducing the
percentage required for modification is effective against any first mortgage bonds without the
first mortgage bondholders consent. Consumers has reserved the right without any consent or other
action by the holders of first mortgage bonds of any series created after September 15, 1993 or by
the holder of any senior note or exchange note that is secured by first mortgage bonds to amend the
Indenture in order to substitute a majority in principal amount of first mortgage bonds outstanding
under the Indenture for the 75% requirement set forth above (and then only in respect of such
series of outstanding bonds as shall be affected by the proposed action) and to eliminate the
requirement for a series-by-series consent requirement.
Defaults
The Indenture defines the following as defaults:
|
|
|
failure to pay principal when due; |
|
|
|
|
failure to pay interest for 60 days; |
|
|
|
|
failure to pay any installment of any sinking or other purchase fund for 90 days; |
|
|
|
|
certain events in bankruptcy, insolvency or reorganization; and |
|
|
|
|
failure to perform any other covenant for 90 days following written demand by the Trustee
for Consumers to cure such failure. |
Consumers has covenanted to pay interest on any overdue principal and (to the extent permitted
by law) on overdue installments of interest, if any, on the first mortgage bonds under the
Indenture at the rate of 6% per year. The Indenture does not contain a provision requiring any
periodic evidence to be furnished as to the absence of default or as to compliance with the terms
thereof. However, Consumers is required by law to furnish annually to the Trustee a certificate as
to compliance with all conditions and covenants under the Indenture.
Book-Entry Only Issuance The Depository Trust Company
The Bonds initially will be in the form of one or more Global Bonds. Upon issuance, the
Global Bonds will be deposited with the Trustee, as custodian for DTC, and registered in the name
of DTC or its nominee, in each case for credit to the accounts of DTCs Direct Participants and
Indirect Participants (each as defined below).
Transfer of beneficial interests in any Global Bonds will be subject to the applicable rules
and procedures of DTC and its Direct Participants or Indirect Participants, which may change from
time to time.
The Global Bonds may be transferred, in whole and not in part, only to another nominee of DTC
or to a successor of DTC or its nominee in certain limited circumstances. Beneficial interests in
the Global Bonds may be exchanged for bonds in certificated form (Certificated Bonds) in certain
limited circumstances. See Exchange of Interests in Global Bonds for Certificated Bonds.
Depositary Procedures
DTC has advised Consumers that DTC is a limited-purpose trust company created to hold
securities for its participating organizations (collectively, the Direct Participants) and to
facilitate the clearance and settlement of transactions in those securities between Direct
Participants through electronic book-entry changes in accounts of Direct Participants. The Direct
Participants include securities brokers and dealers (including the underwriters), banks, trust
companies, clearing corporations and certain other organizations. Access to DTCs system is also
available to other entities that clear through or maintain a direct or indirect, custodial
relationship with a Direct Participant (collectively, the Indirect Participants). DTC may hold
securities beneficially owned by other persons only through the Direct Participants or Indirect
Participants, and such other persons ownership interest and transfer of ownership interest will be
recorded only on the records of the appropriate Direct Participant and/or Indirect Participant, and
not on the records maintained by DTC.
DTC has also advised Consumers that, pursuant to DTCs procedures, (1) upon deposit of the
Global Bonds, DTC will credit the accounts of the Direct Participants designated by the
underwriters with portions of the principal amount of the Global Bonds allocated
S-13
by the underwriters to such Direct Participants and (2) DTC will maintain records of the
ownership interests of such Direct Participants in the Global Bonds and the transfer of ownership
interests by and between Direct Participants. DTC will not maintain records of the ownership
interests of, or the transfer of ownership interests by and between, Indirect Participants or other
owners of beneficial interests in the Global Bonds. Direct Participants and Indirect Participants
must maintain their own records of the ownership interests of, and the transfer of ownership
interests by and between, Indirect Participants and other owners of beneficial interests in the
Global Bonds. Investors in the Global Bonds may hold their interests therein directly through DTC
if they are Direct Participants in DTC or indirectly through organizations that are Direct
Participants in DTC. All ownership interests in any Global Bonds will be subject to the procedures
and requirements of DTC.
The laws of some states require that certain persons take physical delivery in definitive,
certificated form of securities that they own. This may limit or curtail the ability to transfer
beneficial interests in a Global Bond to such persons. Because DTC can act only on behalf of
Direct Participants, which in turn act on behalf of Indirect Participants and others, the ability
of a person having a beneficial interest in a Global Bond to pledge such interest to persons or
entities that are not Direct Participants in DTC, or to otherwise take actions in respect of such
interests, may be affected by the lack of physical certificates evidencing such interests. For
certain other restrictions on the transferability of the Bonds, see Exchange of Interests in
Global Bonds for Certificated Bonds.
Except as described in Exchange of Interests in Global Bonds for Certificated Bonds,
owners of beneficial interests in the Global Bonds will not have Bonds registered in their names,
will not receive physical delivery of Certificated Bonds in certificated form and will not be
considered the registered owners or holders thereof under the Indenture for any purpose.
Under the terms of the Indenture, Consumers and the Trustee will treat the persons in whose
names the Bonds are registered (including Bonds represented by Global Bonds) as the owners thereof
for the purpose of receiving payments and for any and all other purposes whatsoever. Payments in
respect of the principal, premium, liquidated damages, if any, and interest on Global Bonds
registered in the name of DTC or its nominee will be payable by the Trustee to DTC or its nominee
as the registered holder under the Indenture. Consequently, neither Consumers, the Trustee nor any
agent of Consumers or the Trustee has or will have any responsibility or liability for (1) any
aspect of DTCs records or any Direct Participants or Indirect Participants records relating to
or payments made on account of beneficial ownership interests in the Global Bonds or for
maintaining, supervising or reviewing any of DTCs records or any Direct Participants or Indirect
Participants records relating to the beneficial ownership interests in any Global Bond or (2) any
other matter relating to the actions and practices of DTC or any of its Direct Participants or
Indirect Participants.
DTC has advised Consumers that its current payment practice (for payments of principal,
interest and the like) with respect to securities such as the Bonds is to credit the accounts of
the relevant Direct Participants with such payment on the payment date in amounts proportionate to
such Direct Participants respective ownership interests in the applicable Global Bonds as shown on
DTCs records. Payments by Direct Participants and Indirect Participants to the beneficial owners
of the Bonds will be governed by standing instructions and customary practices between them and
will not be the responsibility of DTC, the Trustee or Consumers. Neither Consumers nor the Trustee
will be liable for any delay by DTC or its Direct Participants or Indirect Participants in
identifying the beneficial owners of the Bonds, and Consumers and the Trustee may conclusively rely
on and will be protected in relying on instructions from DTC or its nominee as the registered owner
of the Bonds for all purposes.
The Global Bonds will trade in DTCs Same-Day Funds Settlement System and, therefore,
transfers between Direct Participants in DTC will be effected in accordance with DTCs procedures,
and will be settled in immediately available funds. Transfers between Indirect Participants who
hold an interest through a Direct Participant will be effected in accordance with the procedures of
such Direct Participant but generally will settle in immediately available funds.
DTC has advised Consumers that it will take any action permitted to be taken by a holder of
Bonds of a series only at the direction of one or more Direct Participants to whose account
interests in the related Global Bonds are credited and only in respect of such portion of the
aggregate principal amount of such Bonds as to which such Direct Participant or Direct Participants
has or have given direction. However, if there is an event of default with respect to the Bonds,
DTC reserves the right to exchange the related Global Bonds (without the direction of one or more
of its Direct Participants) for legended Certificated Bonds, and to distribute such Certificated
Bonds to its Direct Participants. See Exchange of Interests in Global Bonds for Certificated
Bonds.
Although DTC has agreed to the foregoing procedures to facilitate transfers of interests in
the Global Bonds among Direct Participants, it is under no obligation to perform or to continue to
perform such procedures, and such procedures may be discontinued at any time. None of Consumers,
the underwriters or the Trustee will have any responsibility for the performance by DTC, or its
respective Direct Participants and Indirect Participants, of their respective obligations under the
rules and procedures governing any of their operations.
S-14
The information in this section concerning DTC and its book-entry system has been obtained
from DTC, and Consumers takes no responsibility for the accuracy thereof.
Exchange of Interests in Global Bonds for Certificated Bonds
Global Bonds may be exchanged for Certificated Bonds if (1) (a) DTC notifies Consumers that it
is unwilling or unable to continue as depositary for the Global Bonds or Consumers determines that
DTC is unable to act as such depositary and Consumers thereupon fails to appoint a successor
depositary within 90 days or (b) DTC has ceased to be a clearing agency registered under the
Exchange Act, (2) Consumers, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Certificated Bonds or (3) there shall have occurred and be continuing a default or
an event of default with respect to the Bonds. In any such case, Consumers will notify the Trustee
in writing that, upon surrender by the Direct Participants and Indirect Participants of their
interest in such Global Bond, Certificated Bonds will be issued to each person that such Direct
Participants and Indirect Participants and DTC identify as being the beneficial owner of the
related Bonds.
Beneficial interests in Global Bonds held by any Direct Participant or Indirect Participant
may be exchanged for Certificated Bonds upon request to DTC, or by such Direct Participant (for
itself or on behalf of an Indirect Participant), to the Trustee in accordance with customary DTC
procedures. Certificated Bonds delivered in exchange for any beneficial interest in any Global
Bond will be registered in the names, and issued in any approved denominations, requested by DTC on
behalf of such Direct Participants or Indirect Participants (in accordance with DTCs customary
procedures).
Neither Consumers nor the Trustee will be liable for any delay by the holder of Global Bonds
or DTC in identifying the beneficial owners of the related Bonds, and Consumers and the Trustee may
conclusively rely on, and will be protected in relying on, instructions from the holder of the
Global Bond or DTC for all purposes.
Certificated Bonds
Certificated Bonds may be exchangeable for other Certificated Bonds of any authorized
denominations and of a like aggregate principal amount and tenor. Certificated Bonds may be
presented for exchange, and may be presented for registration of transfer (duly endorsed, or
accompanied by a duly executed written instrument of transfer), at the designated office of the
Trustee in Detroit, Michigan (the Security Registrar). The Security Registrar will not charge a
service charge for any registration of transfer or exchange of Bonds; however, Consumers may
require payment by a holder of a sum sufficient to cover any tax, assessment or other governmental
charge payable in connection therewith, as described in the Indenture. Such transfer or exchange
will be effected upon the Security Registrar being satisfied with the documents of title and
identity of the person making the request. Consumers may at any time designate additional transfer
agents with respect to the Bonds.
Consumers shall not be required to (a) issue, exchange or register the transfer of any
Certificated Bond for a period of 15 days next preceding the mailing of notice of redemption of
such Bond or (b) exchange or register the transfer of any Certificated Bond or portion thereof
selected, called or being called for redemption, except, in the case of any Certificated Bond to be
redeemed in part, the portion thereof not so to be redeemed.
If a Certificated Bond is mutilated, destroyed, lost or stolen, it may be replaced at the
office of the Security Registrar upon payment by the holder of such expenses as may be incurred by
Consumers and the Security Registrar in connection therewith and the furnishing of such evidence
and indemnity as Consumers and the Security Registrar may require. Mutilated Bonds must be
surrendered before new Bonds will be issued.
Same Day Settlement
Payments in respect of the Bonds represented by the Global Bonds (including principal,
premium, if any, and interest) will be made by wire transfer of immediately available same day
funds to the accounts specified by DTC as the holder of the Global Bonds. Principal, premium, if
any, and interest and liquidated damages, if any, on all Certificated Bonds in registered form will
be payable at the office or agency of the Trustee in The City of New York, except that, at the
option of Consumers, payment of any interest and liquidated damages, if any, may be made except for
DTC (1) by check mailed to the address of the person entitled thereto as such address shall appear
in the security register or (2) by wire transfer to an account maintained by the person entitled
thereto as specified in the security register.
S-15
RATINGS
S&P has assigned the Bonds a rating of BBB, Moodys has assigned the Bonds a rating of Baa1
and Fitch has assigned the Bonds a rating of BBB+. Such ratings reflect only the views of such
ratings agencies, and do not constitute a recommendation to buy, sell or hold securities. In
general, ratings address credit risk. Each rating should be evaluated independently of any other
rating. An explanation of the significance of such ratings may be obtained only from such rating
agencies at the following addresses: Standard & Poors, 25 Broadway, New York, New York 10004;
Moodys Investors Service, Inc., 99 Church Street, New York, New York 10007; and Fitch, Inc., 1
State Street Plaza, New York, New York 10004. The security rating may be subject to revision or
withdrawal at any time by the assigning rating organization, and, accordingly, there can be no
assurance that such ratings will remain in effect for any period of time or that they will not be
revised downward or withdrawn entirely by the rating agencies if, in their judgment, circumstances
warrant. Neither Consumers nor the underwriters have undertaken any responsibility to oppose any
proposed downward revision or withdrawal of a rating on the Bonds. Any such downward revision or
withdrawal of such ratings may have an adverse effect on the market price of the Bonds.
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement for the Bonds dated
the date of this prospectus supplement, each underwriter named below has severally agreed to
purchase, and we have agreed to sell to that underwriter, the principal amounts of Bonds set forth
opposite the underwriters name.
|
|
|
|
|
|
|
Principal Amount |
|
Underwriters |
|
of Bonds |
|
Barclays Capital Inc. |
|
$ |
80,000,000 |
|
J.P. Morgan Securities Inc. |
|
|
80,000,000 |
|
BNP Paribas Securities Corp. |
|
|
80,000,000 |
|
Scotia Capital (USA) Inc. |
|
|
80,000,000 |
|
SunTrust Robinson Humphrey, Inc. |
|
|
80,000,000 |
|
Comerica Securities, Inc. |
|
|
18,750,000 |
|
Greenwich Capital Markets, Inc. |
|
|
18,750,000 |
|
KeyBanc Capital Markets Inc. |
|
|
18,750,000 |
|
Wedbush Morgan Securities Inc. |
|
|
18,750,000 |
|
Blaylock Robert Van, LLC |
|
|
8,333,000 |
|
Fifth Third Securities, Inc. |
|
|
8,334,000 |
|
The Williams Capital Group, L.P. |
|
|
8,333,000 |
|
|
|
|
|
Total |
|
$ |
500,000,000 |
|
|
|
|
|
The underwriting agreement provides that the obligations of the underwriters to purchase the
Bonds are subject to approval of legal matters by counsel and to other conditions. The
underwriters are obligated to purchase and accept delivery of all Bonds if any are purchased.
The underwriters propose to offer the Bonds directly to the public at the public offering
price set forth on the cover page of this prospectus supplement and may offer the Bonds to dealers
at the public offering price less a concession not to exceed 0.40% of the principal amount of the
Bonds. The underwriters may allow, and dealers may reallow, a concession not to exceed 0.25% of
the principal amount of the Bonds on sales to other dealers. After the initial offering of the
Bonds to the public, the representatives may change the public offering price and concessions.
We estimate that our out-of-pocket expenses for this offering will be approximately $300,000.
The underwriters have advised us that they currently intend to make a market in the Bonds.
However, they are not obligated to do so and they may discontinue any market-making activities with
respect to the Bonds at any time without notice. In addition, marketing-making activity will be
subject to the limits imposed by the Securities Act of 1933, as amended (the Securities Act), and
the Exchange Act.
In connection with this offering, the underwriters may purchase and sell Bonds in the open
market. These transactions may include over-allotment, syndicate covering transactions and
stabilizing transactions. Over-allotment involves sales of Bonds in excess of the principal amount
of Bonds to be purchased by the underwriters in this offering, which creates a short position for
the underwriters. Covering transactions involve purchases of the Bonds in the open market after
the distribution has been completed in order to cover short positions. Stabilizing transactions
consist of certain bids or purchases of Bonds made for the purpose of
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preventing or retarding a decline in the market price of the Bonds while the offering is in
progress. Any of these activities may have the effect of preventing or retarding a decline in the
market price of the Bonds. They may also cause the price of the Bonds to be higher than the price
that otherwise would exist in the open market in the absence of these transactions. The
underwriters may conduct these transactions in the over-the-counter market or otherwise. If the
underwriters commence any of these transactions, they may discontinue them at any time.
We expect to deliver the Bonds against payment for the Bonds on or about the date specified in
the last paragraph of the cover page of this prospectus supplement, which will be the fourth
business day following the date of pricing of the Bonds. Since trades in the secondary market
generally settle in three business days, purchasers who wish to trade Bonds on the date of pricing
will be required, by virtue of the fact that the Bonds initially will settle in T+4, to specify
alternative settlement arrangements to prevent a failed settlement.
The underwriters have performed investment banking and advisory services for us and our
affiliates from time to time for which they have received customary fees and expenses. Affiliates
of some of the underwriters are lenders to us and our affiliates under our credit facilities. Some
of the underwriters and their affiliates may engage in other transactions with, and perform other
services for, us and our affiliates in the ordinary course of business.
We have agreed to indemnify the underwriters against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments that the underwriters may be
required to make because of any of those liabilities.
UnionBanc Investment Services LLC, a Financial Industry Regulatory Authority member and
subsidiary of Union Bank, N.A., is being paid a referral fee by Wedbush Morgan Securities Inc.
LEGAL OPINIONS
Shelley J. Ruckman, Esq., Assistant General Counsel of Consumers, will render opinions as to
the legality of the Bonds for Consumers.
Pillsbury Winthrop Shaw Pittman LLP will pass upon certain legal matters with respect to the
Bonds for the underwriters.
EXPERTS
The consolidated financial statements and schedule of Consumers Energy Company as of and for
the years ended December 31, 2008 and 2007 and managements assessment of the effectiveness of
internal control over financial reporting as of December 31, 2008 (which is included in
Managements Report on Internal Control over Financial Reporting), incorporated in this prospectus
supplement by reference to Consumers Energy Companys Annual Report on Form 10-K for the year ended
December 31, 2008, have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, an independent registered public accounting firm, given on the authority of said firm as
experts in auditing and accounting.
The consolidated financial statements (including schedule appearing therein) for the year
ended December 31, 2006 of Consumers Energy Company appearing in Consumers Energy Companys Annual
Report (Form 10-K) for the year ended December 31, 2008 included therein, have been audited by
Ernst & Young LLP, independent registered public accounting firm, as set forth in their report
thereon, included therein, and incorporated herein by reference, which is based in part on the
report of PricewaterhouseCoopers LLP, independent registered public accounting firm for the MCV
Partnership. Such consolidated financial statements have been incorporated herein by reference in
reliance upon such reports given on the authority of such firms as experts in accounting
and auditing.
The financial statements of the MCV Partnership, as of November 21, 2006 and for the period
ended November 21, 2006, not separately presented in this prospectus supplement, have been audited
by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose report
thereon is incorporated in this prospectus supplement by reference to Consumers Energy Companys
Annual Report on Form 10-K for the year ended December 31, 2008. Such financial statements, to the
extent they have been included in the financial statements of Consumers Energy Company, have been
so incorporated in reliance on the report of such independent registered public accounting firm
given on the authority of said firm as experts in auditing and accounting.
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PROSPECTUS
CMS ENERGY CORPORATION
Common Stock, Preferred Stock, Cumulative Convertible Preferred Stock,
Senior Debt Securities, Senior Convertible Debt Securities, Subordinated Debt Securities,
Stock Purchase Contracts, Stock Purchase Units and Guarantees
CMS ENERGY TRUST IV
CMS ENERGY TRUST V
Trust Preferred Securities,
Guaranteed To The Extent Set Forth Herein By
CMS Energy Corporation
CONSUMERS ENERGY COMPANY
Senior Notes and First Mortgage Bonds
CMS Energy Corporation, a Michigan corporation, may offer, from time to time:
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shares of its common stock, par value $0.01 per share (CMS Energy Common
Stock); |
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shares of its preferred stock, par value $0.01 per share (Preferred Stock); |
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shares of its 4.50% cumulative convertible preferred stock (Cumulative
Convertible Preferred Stock); |
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unsecured senior or subordinated debt securities consisting of debentures,
convertible debentures, notes, convertible notes or other unsecured evidence of
indebtedness; |
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stock purchase contracts to purchase CMS Energy Common Stock; |
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stock purchase units, each representing ownership of a CMS Energy Trust IV or
CMS Energy Trust V stock purchase contract or unsecured senior or subordinated debt
securities of CMS Energy Corporation or trust preferred securities or debt obligations
of third parties, including U.S. Treasury securities, securing the holders obligation
to purchase the CMS Energy Common Stock under the stock purchase contract, or any
combination of the above; and |
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guarantees of CMS Energy Corporation with respect to trust preferred securities
of CMS Energy Trust IV and CMS Energy Trust V. |
CMS Energy Trust IV and CMS Energy Trust V, each of which is a Delaware business trust, may
offer, from time to time, trust preferred securities. The trust preferred securities represent
preferred undivided beneficial interests in the assets of CMS Energy Trust IV and CMS Energy Trust
V.
Consumers Energy Company, a Michigan corporation, may offer, from time to time, secured senior
debt consisting of senior notes and first mortgage bonds.
For each type of security listed above, the amount, price and terms will be determined at or
prior to the time of sale.
We will provide the specific terms of these securities in an accompanying prospectus
supplement or supplements. You should read this prospectus and the accompanying prospectus
supplement or supplements carefully before you invest.
Investing in these securities involves risks. See Risk Factors on page 3.
The Common Stock of CMS Energy Corporation is listed on the New York Stock Exchange under the
symbol CMS. Unless otherwise indicated in a prospectus supplement, the other securities
described in this prospectus will not be listed on a national securities exchange.
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 September 5, 2008.
TABLE OF CONTENTS
PROSPECTUS
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Prospectus Summary |
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3 |
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Risk Factors |
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Where You Can Find More Information |
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Documents Incorporated by Reference |
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Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995 |
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The Registrants |
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Use of Proceeds |
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Ratio of Earnings to Fixed Charges and Ratio of Earnings
to Combined Fixed Charges and Preferred Dividends |
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Description of Securities |
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Book-Entry System |
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Legal Opinions |
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Experts |
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PROSPECTUS SUMMARY
This prospectus is part of a registration statement on Form S-3 that we filed with the
Securities and Exchange Commission utilizing a shelf registration process. Under this shelf
registration process, any of us may, from time to time, sell any combination of our securities
described in this prospectus in one or more offerings.
This prospectus provides you with a general description of the securities we may offer. Each
time we sell securities, we will provide a prospectus supplement containing specific information
about the terms of that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. If there is any inconsistency between the information in
this prospectus and the applicable prospectus supplement, you should rely on the information
contained in the prospectus supplement. You should read this prospectus and the applicable
prospectus supplement together with the additional information described under the heading Where
You Can Find More Information.
As used in this prospectus, CMS Energy refers to CMS Energy Corporation, the Trusts refer,
collectively, to CMS Energy Trust IV and CMS Energy Trust V, and Consumers refers to Consumers
Energy Company. The terms we, us and our refer to CMS Energy when discussing the securities
to be issued by CMS Energy, the Trusts when discussing the securities to be issued by the Trusts,
Consumers when discussing the securities to be issued by Consumers and collectively to all of the
Registrants where the context requires. Registrants refers, collectively, to CMS Energy, the
Trusts and Consumers.
The principal executive offices of each of CMS Energy and Consumers are located at One Energy
Plaza, Jackson, Michigan 49201, and the telephone number is 517-788-0550. The principal executive
offices of each Trust are c/o CMS Energy Corporation, One Energy Plaza, Jackson, Michigan 49201,
and the telephone number is 517-788-0550.
RISK FACTORS
Before acquiring any of the securities that may be offered by this prospectus, you should
carefully consider the risks discussed in the sections of CMS Energys and Consumers combined
Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and
Exchange Commission on February 21, 2008 entitled Risk Factors and Forward-Looking Statements
and Information, as updated by the sections of CMS Energys and Consumers combined Forms 10-Q for
the quarter ended March 31, 2008 filed with the Securities and Exchange Commission on May 5, 2008
and the quarter ended June 30, 2008 filed with the Securities and Exchange Commission on August 5,
2008 entitled Risk Factors and Forward-Looking Statements and Information, which are
incorporated by reference in this prospectus. You should also carefully consider all of the
information contained or incorporated by reference in this prospectus or in any prospectus
supplement before you invest in any Registrants securities. See Where You Can Find More
Information below.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission (the SEC) a registration statement
on Form S-3 (the Registration Statement) under the Securities Act of 1933, as amended (the
Securities Act), with respect to the securities offered in this prospectus. We have not included
certain portions of the Registration Statement in this prospectus as permitted by the SECs rules
and regulations. Statements in this prospectus concerning the provisions of any document filed as
an exhibit to the Registration Statement are not necessarily complete and are qualified in their
entirety by reference to such exhibit. For further information, you should refer to the
Registration Statement and its exhibits.
Each of CMS Energy and Consumers is subject to the informational requirements of the
Securities Exchange Act of l934, as amended (the Exchange Act), and therefore files annual,
quarterly and current reports, proxy statements and other information with the SEC. You may read
and copy the Registration Statement (with exhibits), as well as the reports and other information
filed by any of the Registrants with the SEC, at the SECs Public Reference Room at its principal
offices at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation
of the SECs Public Reference Room by calling 1-800-SEC-0330. Information filed by
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us is also available at the SECs Internet site at www.sec.gov. You can find additional
information about us on CMS Energys website at www.cmsenergy.com. The information on this website
is not a part of this prospectus.
You should rely only on the information incorporated by reference or provided in this
prospectus or in any prospectus supplements. We have not authorized anyone to provide you with
different information. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the front of those
documents. This prospectus does not constitute an offer to sell or a solicitation of an offer to
buy the securities in any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction.
We have not included separate financial statements of the Trusts. CMS Energy and the Trusts
do not consider that such financial statements would be material to holders of Trust Preferred
Securities of the Trusts because each Trust is a special purpose entity, has no operating history
and has no independent operations. The Trusts are not currently involved in and do not anticipate
being involved in any activity other than as described under The RegistrantsThe Trusts below.
Further, CMS Energy and the Trusts believe that financial statements of the Trusts are not material
to the holders of the Trust Preferred Securities of the Trusts since CMS Energy will guarantee the
Trust Preferred Securities of the Trusts. Holders of the Trust Preferred Securities of the Trusts,
with respect to the payment of distributions and amounts upon liquidation, dissolution and
winding-up, are at least in the same position vis-à-vis the assets of CMS Energy as a preferred
stockholder of CMS Energy. CMS Energy beneficially owns all of the undivided beneficial interests
in the assets of the Trusts (other than the beneficial interests represented by the Trust Preferred
Securities of the Trusts). See The RegistrantsThe Trusts below, Description of SecuritiesThe
TrustsTrust Preferred Securities below and Description of SecuritiesThe TrustsEffect of
Obligations Under the CMS Energy Debt Securities and the GuaranteesThe CMS Energy Guarantees
below. In the event that the Trusts issue securities, our filings under the Exchange Act will
include an audited footnote to CMS Energys annual financial statements stating that the Trusts are
wholly owned by CMS Energy, that the sole assets of the Trusts are the Senior Debt Securities or
the Subordinated Debt Securities of CMS Energy having a specified aggregate principal amount, and
that, considered together, the back-up undertakings, including the Guarantees of CMS Energy,
constitute a full and unconditional guarantee by CMS Energy of the Trusts obligations under the
Trust Preferred Securities issued by the Trusts.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference the information that we file with them, which
means that we can disclose important information to you by referring you to those documents.
Information incorporated by reference is considered to be part of this prospectus. Later
information that we file with the SEC (other than Current Reports on Form 8-K furnished under Item
2.02 or Item 7.01 of Form 8-K) will automatically update and supersede this information. Each
Registrant incorporates by reference into this prospectus the documents listed below related to
such Registrant and any future filings (other than Current Reports on Form 8-K furnished under Item
2.02 or Item 7.01 of Form 8-K) that such Registrant makes with the SEC under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act until the offerings contemplated by this prospectus are terminated.
CMS ENERGY
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Annual Report on Form 10-K for the year ended December 31, 2007 |
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Quarterly Reports on Form 10-Q for the quarters ended March 31, 2008 and June
30, 2008 |
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Current Reports on Form 8-K or Form 8-K/A filed January 11, 2008, January 30,
2008, March 14, 2008 (SEC film number 08690529), March 21, 2008, June 11, 2008 and June
12, 2008 |
CONSUMERS
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Annual Report on Form 10-K for the year ended December 31, 2007 |
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Quarterly Reports on Form 10-Q for the quarters ended March 31, 2008 and June
30, 2008 |
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Current Reports on Form 8-K or Form 8-K/A filed January 11, 2008, January 30,
2008, March 14, 2008 (SEC film number 08690530), June 11, 2008 and June 12, 2008 |
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We will provide to each person, including any beneficial owner, to whom a copy of this
prospectus is delivered a copy of any or all of the information that has been incorporated by
reference in this prospectus but not delivered with this prospectus. We will provide this
information upon written or oral request at no cost to the requester. You should direct your
requests to:
CMS Energy Corporation
Attention: Office of the Secretary
One Energy Plaza
Jackson, Michigan 49201
Telephone: 517-788-0550
SAFE HARBOR STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This prospectus, any related prospectus supplement and the documents that we incorporate by
reference herein and therein may contain statements that are statements concerning our
expectations, plans, objectives, future financial performance and other items that are not
historical facts. These statements are forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward looking statements involve risks and
uncertainties that may cause actual results or outcomes to differ materially from those included in
the forward looking statements. In connection with the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, the Registrants are filing herein or incorporating by
reference cautionary statements identifying important factors that could cause their respective
actual results to differ materially from those projected in forward looking statements (as such
term is defined in the Private Securities Litigation Reform Act of 1995) made by or on behalf of
the Registrants. Any statements that express or involve discussions as to expectations, beliefs,
plans, objectives, assumptions or future events, performance or growth (often, but not always,
through the use of words or phrases such as may, could, anticipates, believes, estimates,
expects, intends, plans, forecasts and similar expressions) are not statements of
historical facts and are forward looking. Forward looking statements involve estimates,
assumptions and uncertainties that could cause actual results to differ materially from those
expressed in the forward looking statements. Accordingly, any such statements are qualified in
their entirety by reference to, and are accompanied by, the important factors described in the
sections of CMS Energys and Consumers combined Annual Report on Form 10-K for the year ended
December 31, 2007 filed with the SEC on February 21, 2008 entitled Risk Factors and
Forward-Looking Statements and Information, as updated by the sections of CMS Energys and
Consumers combined Forms 10-Q for the quarter ended March 31, 2008 filed with the SEC on May 5,
2008 and the quarter ended June 30, 2008 filed with the SEC on August 5, 2008 entitled Risk
Factors and Forward-Looking Statements and Information, that could cause a Registrants actual
results to differ materially from those contained in forward looking statements of such Registrant
made by or on behalf of such Registrant.
All such factors are difficult to predict, contain uncertainties that may materially affect
actual results and are beyond the control of the Registrants. You are cautioned not to place undue
reliance on forward looking statements. Any forward looking statement speaks only as of the date
on which such statement is made, and the Registrants undertake no obligation to update any forward
looking statement or statements to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated events. New factors emerge from
time to time, and it is not possible for each Registrants management to predict all of such
factors, nor can such management assess the impact of each such factor on the business of such
Registrant or the extent to which any factor, or combination of factors, may cause actual results
of such Registrant to differ materially from those contained in any forward looking statements.
THE REGISTRANTS
CMS ENERGY
CMS Energy is an energy holding company operating through subsidiaries in the United States,
primarily in Michigan. Its two principal subsidiaries are Consumers and CMS Enterprises Company
(Enterprises). Consumers is a public utility that provides electricity and/or natural gas to
almost 6.5 million of Michigans 10 million residents and serves customers in all 68 counties of
Michigans lower peninsula. Enterprises, through
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various subsidiaries and certain equity investments, is engaged primarily in domestic
independent power production. CMS Energy manages its businesses by the nature of services each
provides and operates principally in three business segments: electric utility, gas utility, and
enterprises.
THE TRUSTS
CMS Energy Trust IV and CMS Energy Trust V are statutory business trusts formed under the
Delaware Statutory Trust Act pursuant to (i) a trust agreement executed by CMS Energy, as sponsor,
and the trustees of the Trusts (the CMS Energy Trustees) and (ii) the filing of a certificate of
trust with the Secretary of State of the State of Delaware. At the time of public issuance of
Trust Preferred Securities of the Trusts, each trust agreement will be amended and restated in its
entirety (as so amended and restated, the Trust Agreement) and will be qualified as an indenture
under the Trust Indenture Act of 1939, as amended (the Trust Indenture Act). CMS Energy will
directly or indirectly acquire common securities of each Trust (the Common Securities and,
together with the Trust Preferred Securities of such Trust, the Trust Securities) in an aggregate
liquidation amount equal to approximately 3% for the total capital of the Trust. Each Trust exists
for the exclusive purposes of:
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issuing Trust Preferred Securities and Common Securities representing undivided
beneficial interests in the assets of the Trust; |
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investing the gross proceeds of the Trust Securities in the Senior Debt
Securities or Subordinated Debt Securities of CMS Energy; and |
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Each Trust has a term of approximately 30 years, but may terminate earlier as provided in the
Trust Agreement.
CONSUMERS
Consumers was formed in Michigan in 1968 and is the successor to a corporation organized in
Maine in 1910 that conducted business in Michigan from 1915 to 1968. Consumers serves individuals
and companies operating in the automotive, metal, chemical and food products industries as well as
a diversified group of other industries. In 2007, Consumers served 1.8 million electric customers
and 1.7 million gas customers. Consumers rates and certain other aspects of its business are
subject to the jurisdiction of the Michigan Public Service Commission and the Federal Energy
Regulatory Commission. Consumers manages its business by the nature of service provided and
operates principally in two business segments: electric utility and gas utility.
USE OF PROCEEDS
Except as otherwise provided in the applicable prospectus supplement or other offering
materials, the net proceeds from the sale of the CMS Energy and Consumers securities will be used
for general corporate purposes. If we do not use the net proceeds immediately, we may temporarily
invest them in short-term, interest-bearing obligations. The specific use of proceeds from the
sale of securities will be set forth in the applicable prospectus supplement or other offering
materials relating to the offering of such securities. The net proceeds received by each of the
Trusts from the sale of its Trust Preferred Securities or the Common Securities will be used to
purchase from CMS Energy its Senior Debt Securities or Subordinated Debt Securities.
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
Each of the ratio of earnings to fixed charges and the ratio of earnings to combined fixed
charges and preferred dividends of CMS Energy and Consumers is incorporated by reference from their
combined Form 10-Q for the quarter ended June 30, 2008 filed with the SEC on August 5, 2008.
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DESCRIPTION OF SECURITIES
CMS ENERGY
Introduction
Specific terms of the shares of CMS Energy Common Stock, the shares of Preferred Stock, the
shares of Cumulative Convertible Preferred Stock, unsecured senior debt securities (the Senior
Debt Securities), unsecured convertible senior debt securities (the Senior Convertible Debt
Securities) and unsecured subordinated debt securities (the Subordinated Debt Securities) (the
Senior Debt Securities, the Senior Convertible Debt Securities and the Subordinated Debt Securities
are referred to, individually, as a CMS Energy Debt Security and, collectively, as the CMS
Energy Debt Securities), stock purchase contracts to purchase CMS Energy Common Stock (the Stock
Purchase Contracts), stock purchase units (the Stock Purchase Units), each representing
ownership of a Stock Purchase Contract and Senior Debt Securities, Subordinated Debt Securities,
Trust Preferred Securities (as defined below) or debt obligations of third parties, including U.S.
Treasury securities, securing the holders obligation to purchase the CMS Energy Common Stock under
the Stock Purchase Contract, or any combination of the foregoing, irrevocable guarantees
(individually, a Guarantee and, collectively, Guarantees) of CMS Energy, on a senior or
subordinated basis as applicable, and to the extent set forth therein, with respect to each of the
Trust Securities, the payment of distributions, the redemption price, including all accrued or
deferred and unpaid distributions, and payment on liquidation, but only to the extent of funds on
hand, and trust preferred securities (the Trust Preferred Securities) representing preferred
undivided beneficial interests in the assets of the Trust, in respect of which this prospectus is
being delivered (collectively, the CMS Energy Offered Securities), will be set forth in an
accompanying prospectus supplement or supplements, together with the terms of the offering of the
CMS Energy Offered Securities, the initial price thereof and the net proceeds from the sale
thereof. The prospectus supplement will set forth with regard to the particular CMS Energy Offered
Securities, without limitation, the following:
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in the case of CMS Energy Debt Securities, the designation, aggregate principal
amount, denomination, maturity, premium, if any, any exchange, conversion, redemption
or sinking fund provisions, interest rate (which may be fixed or variable), the time or
method of calculating interest payments, the right of CMS Energy, if any, to defer
payment or interest on the CMS Energy Debt Securities and the maximum length of such
deferral, put options, if any, public offering price, ranking, any listing on a
securities exchange and other specific terms of the offering and sale thereof; |
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in the case of CMS Energy Common Stock, the number of shares, public offering
price and other specific terms of the offering and sale thereof; |
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in the case of Trust Preferred Securities, the designation, number of shares,
liquidation preference per security, public offering price, any listing on a securities
exchange, dividend rate (or method of calculation thereof), dates on which dividends
shall be payable and dates from which dividends shall accrue, any voting rights, any
redemption, exchange or sinking fund provisions and any other rights, preferences,
privileges, limitations or restrictions relating to a specific series of the Trust
Preferred Securities, including a description of the Guarantee, as the case may be; |
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in the case of Preferred Stock, the designation, number of shares, liquidation
preference per security, public offering price, any listing on a securities exchange,
dividend rate (or method of calculation thereof), dates on which dividends shall be
payable and dates from which dividends shall accrue, any voting rights, any redemption,
exchange, conversion or sinking fund provisions and any other rights, preferences,
privileges, limitations or restrictions relating to a specific series of the Preferred
Stock; and |
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in the case of Stock Purchase Units, the specific terms of the Stock Purchase
Contracts and any Senior Debt Securities, Subordinated Debt Securities, Trust Preferred
Securities or debt obligations of third parties securing the holders obligation to
purchase CMS Energy Common Stock under the Stock Purchase Contracts, and the terms of
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Capital Stock
The following summary of certain rights of the holders of CMS Energy capital stock does not
purport to be complete and is qualified in its entirety by express reference to the Restated
Articles of Incorporation of CMS Energy (the CMS Energy Articles of Incorporation) and the Bylaws
of CMS Energy, which are incorporated into this prospectus by reference. See Where You Can Find
More Information above. A copy of the Bylaws of CMS Energy has been previously filed with the
SEC. The CMS Energy Articles of Incorporation are available on our website at www.cmsenergy.com.
The authorized capital stock of CMS Energy consists of:
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350 million shares of CMS Energy Common Stock; and |
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10 million shares of Preferred Stock. |
As of June 30, 2008, CMS Energy had 4,998,000 shares of Cumulative Convertible Preferred Stock
and 225,452,351 shares of CMS Energy Common Stock issued and outstanding.
Common Stock
Dividend Rights and Policy; Restrictions on Dividends
Dividends on CMS Energy Common Stock are paid at the discretion of the board of directors of
CMS Energy based primarily upon the earnings and financial condition of CMS Energy. Dividends are
payable out of the assets of CMS Energy legally available therefor.
In January 2007, the board of directors of CMS Energy reinstated the payment of dividends on
CMS Energy Common Stock, which had been suspended since January 2003.
CMS Energy is a holding company and its assets consist primarily of investments in its
subsidiaries. As a holding company with no significant operations of its own, the principal
sources of its funds are dependent primarily upon the earnings of its subsidiaries (in particular,
Consumers), borrowings and sales of equity. CMS Energys ability to pay dividends on CMS Energy
Common Stock is dependent primarily upon the earnings and cash flows of its subsidiaries and the
distribution or other payment of such earnings to CMS Energy in the form of dividends, tax sharing
payments, loans or advances and repayment of loans and advances from CMS Energy. Accordingly, the
ability of CMS Energy to pay dividends on its capital stock will depend on the earnings, financial
requirements, contractual restrictions of the subsidiaries of CMS Energy (in particular, Consumers)
and other factors. CMS Energys subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay any amounts on the capital stock of CMS Energy or to
make any funds available therefor, whether by dividends, loans or other payments.
Dividends on capital stock of CMS Energy are limited by Michigan law to legally available
assets of CMS Energy. Distributions on CMS Energy Common Stock may be subject to the rights of the
holders, if any, of the Preferred Stock, including the currently issued and outstanding Cumulative
Convertible Preferred Stock. As long as the Cumulative Convertible Preferred Stock is outstanding,
CMS Energy may not pay dividends on the CMS Energy Common Stock unless certain conditions are met,
including, without limitation, that dividends on the Cumulative Convertible Preferred Stock have
been paid. See Preferred StockDividends below.
CMS Energy is subject to the following contractual restrictions on its ability to pay
dividends:
CMS Energys Senior Secured Credit Facility
Under the terms of our Seventh Amended and Restated Credit Agreement dated as of April 2, 2007
(the CMS Energy Credit Facility), we have agreed that we will not, and will not permit our
restricted subsidiaries (as that term is defined in the CMS Energy Credit Facility), directly or
indirectly, to:
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declare or pay any dividend, payment or other distribution of assets,
properties, cash, rights, obligations or securities on account of any share of any
class of CMS Energy Common Stock or the capital stock or other ownership interests of
our restricted subsidiaries (other than stock splits and dividends payable solely in
our non-convertible equity securities (other than Redeemable Stock or Exchangeable
Stock (as such terms are defined in our senior debt indenture dated as of September 15,
1992 between CMS Energy and The Bank of New York Mellon, as trustee, as supplemented
(the Senior Debt Indenture), on April 2, 2007)) and dividends and distributions made
to us or our restricted subsidiaries); |
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purchase, redeem, retire or otherwise acquire for value any such capital stock
or other ownership interests; or |
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make, or permit any restricted subsidiary to make, any distribution of assets
to any of its shareholders (other than distributions to CMS Energy or any restricted
subsidiary); |
other than:
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pursuant to the terms of any class of our capital stock issued and outstanding
(and as in effect on April 2, 2007), any purchase or redemption of our capital stock
made by exchange for, or out of the proceeds of the substantially concurrent sale of,
our capital stock (other than Redeemable Stock or Exchangeable Stock (as such terms are
defined in the Senior Debt Indenture on April 2, 2007)); |
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payments made by us or our restricted subsidiaries pursuant to our tax sharing
agreement; and |
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any cash dividend or cash distribution on CMS Energy Common Stock (provided
that no event of default under the CMS Energy Credit Facility has occurred and is
continuing as of the date of declaration or distribution thereof or would result
therefrom). |
Senior Debt Indenture
Under the terms of the Senior Debt Indenture, we have the following issued and outstanding
securities: 7.75% Senior Notes Due 2010; 8.5% Senior Notes Due 2011; 6.30% Senior Notes Due 2012;
Floating Rate Senior Notes Due 2013; 6.875% Senior Notes Due 2015; 6.55% Senior Notes Due 2017;
3.375% Convertible Senior Notes Due 2023; and 2.875% Convertible Senior Notes Due 2024. So long as
any of such notes issued thereunder are outstanding (other than the 6.55% Senior Notes Due 2017 and
the Floating Rate Senior Notes Due 2013) and until those notes are rated BBB- or above (or an
equivalent rating) by Standard & Poors (as defined in the Senior Debt Indenture) and one Other
Rating Agency (as defined in the Senior Debt Indenture), at which time we will be permanently
released from the provisions of this limitation, we have agreed that we will not, and will not
permit any of our restricted subsidiaries (as defined in the Senior Debt Indenture), directly or
indirectly, to:
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declare or pay any dividend or make any distribution on our capital stock to
the direct or indirect holders of our capital stock (except dividends or distributions
payable solely in our non-convertible capital stock (as defined in the Senior Debt
Indenture) or in options, warrants or other rights to purchase such non-convertible
capital stock and except dividends or other distributions payable to us or one of our
subsidiaries); |
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purchase, redeem or otherwise acquire or retire for value any of our capital
stock; or |
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purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to the scheduled maturity or scheduled repayment thereof, any of our subordinated
indebtedness (as defined in the Senior Debt Indenture) (each, for purposes of the
Senior Debt Indenture, a Restricted Payment), |
if at the time of any Restricted Payment described above (i) an event of default under the Senior
Debt Indenture (or event that with the lapse of time or giving of notice would constitute an event
of default) has occurred and is continuing, or would occur as a result of the Restricted Payment,
or (ii) the aggregate amount of such Restricted Payment and all Restricted Payments made since May
6, 1997 would exceed the sum of:
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100% of our consolidated net income (as defined in the Senior Debt Indenture)
from May 6, 1997 to the end of the most recent fiscal quarter ending at least 45 days
prior to the date of the Restricted Payment (or, in the case of a deficit, minus 100%
of the deficit); and |
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the aggregate net proceeds (as defined in the Senior Debt Indenture) we have
received for any issuance or sale of, or contribution with respect to, our capital
stock subsequent to May 6, 1997. |
Trust Preferred Securities
In June 1997, a CMS Energy affiliated trust issued $172.5 million of 7 3/4% Convertible
Quarterly Income Preferred Securities. The preferred securities are convertible at the option of
the holder into shares of CMS Energy Common Stock at an initial conversion rate of 1.2255 shares of
CMS Energy Common Stock for each preferred security (equivalent to a purchase price of $40.80 per
share of CMS Energy Common Stock), subject to certain adjustments. We may, at our option, cause
the conversion rights of the holders of the preferred securities to expire upon certain conditions.
Under the terms of the indenture dated June 1, 1997 between us and The Bank of New York
Mellon, as trustee, as amended and supplemented (the Subordinated Debt Indenture), and the
guarantee agreement dated June 20, 1997 between us and The Bank of New York Mellon relating to the
preferred securities of CMS Energy Trust I pursuant to which the preferred securities and the
related 7 3/4% Convertible Subordinated Debentures due 2027 were issued, we have agreed that we
will not, and will not cause any of our subsidiaries to, declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any
of our capital stock, if at such time:
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an event has occurred, of which we have actual knowledge, that with the giving
of notice or the lapse of time, or both, would constitute an event of default and in
respect of which we have not taken reasonable steps to cure; |
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we are in default with respect to the payment of any obligations under the
relevant guarantee agreement; or |
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we have given notice of our election to defer payments of interest on the
securities issued under the Subordinated Debt Indenture by extending the payment period
as provided in any further supplemental indenture and have not rescinded such notice,
or such period (or any extension thereof) is continuing. |
Dividend Restrictions Under Michigan Law
Michigan law prohibits payment of a dividend or a repurchase of capital stock if, after giving
it effect, a corporation would not be able to pay its debts as they become due in the usual course
of business, or its total assets would be less than the sum of its total liabilities plus, unless
the CMS Energy Articles of Incorporation provide otherwise, the amount that would be needed, if the
corporation were to be dissolved at the time of the distribution, to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights are superior to those receiving
the distribution (including the rights of holders of preferred stock, if any).
Voting Rights
Each holder of CMS Energy Common Stock is entitled to one vote for each share of CMS Energy
Common Stock held by such holder on each matter voted upon by the shareholders. Such right to vote
is not cumulative. A majority of the votes cast by the holders of shares entitled to vote thereon
is sufficient for the adoption of any question presented, except that certain provisions of the CMS
Energy Articles of Incorporation relating to special shareholder meetings, the removal,
indemnification and liability of CMS Energys board of directors and the requirements for amending
these provisions may not be amended, altered, changed or repealed unless such amendment,
alteration, change or repeal is approved by the affirmative vote of at least 75% of the outstanding
shares entitled to vote thereon.
Under Michigan law, the approval of the holders of a majority of the outstanding shares of CMS
Energy Common Stock would be necessary (1) to authorize, effect or validate the merger or
consolidation of CMS Energy
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into or with any other corporation if such merger or consolidation would adversely affect the
powers or special rights of CMS Energy Common Stock, and (2) to authorize any amendment to the CMS
Energy Articles of Incorporation that would increase or decrease the aggregate number of authorized
shares of CMS Energy Common Stock or alter or change the powers, preferences or special rights of
the shares of CMS Energy Common Stock so as to affect them adversely. The CMS Energy Articles of
Incorporation also provide that, unless the vote or consent of a greater number of shares shall
then be required by law, the vote or consent of the holders of a majority of the shares of CMS
Energy Common Stock then outstanding will be necessary to authorize, effect or validate the merger
or consolidation of CMS Energy into or with any other entity if such merger or consolidation would
adversely affect the powers or special rights of the CMS Energy Common Stock, either directly by
amendment to the CMS Energy Articles of Incorporation or indirectly by requiring the holders of the
CMS Energy Common Stock to accept or retain, in such merger or consolidation, anything other than
(i) shares of such class or (ii) shares of the surviving or resulting corporation, having, in
either case, powers and special rights identical to those of such common stock prior to such merger
or consolidation. The effect of these provisions may be to permit the holders of a majority of the
outstanding shares of CMS Energy Common Stock to block any such merger or amendment that would
adversely affect the powers or special rights of holders of such shares of CMS Energy Common Stock.
Preemptive Rights
The CMS Energy Articles of Incorporation provide that holders of CMS Energy Common Stock will
have no preemptive rights to subscribe for or purchase any additional shares of the capital stock
of CMS Energy of any class now or hereafter authorized, or Preferred Stock, bonds, debentures or
other obligations or rights or options convertible into or exchangeable for or entitling the holder
or owner to subscribe for or purchase any shares of capital stock, or any rights to exchange shares
issued for shares to be issued.
Liquidation Rights
In the event of the dissolution, liquidation or winding up of CMS Energy, whether voluntary or
involuntary, after payment or provision for payment of the debts and other liabilities of CMS
Energy and after there shall have been paid or set apart for the holders of Preferred Stock the
full preferential amounts (including any accumulated and unpaid dividends) to which they are
entitled, the holders of CMS Energy Common Stock will be entitled to receive, on a per share basis,
the assets of CMS Energy remaining for distribution to the holders of CMS Energy Common Stock.
Neither the merger or consolidation of CMS Energy into or with any other corporation, nor the
merger or consolidation of any other corporation into or with CMS Energy nor any sale, transfer or
lease of all or any part of the assets of CMS Energy, shall be deemed to be a dissolution,
liquidation or winding up for the purposes of this provision.
Because CMS Energy has subsidiaries that have debt obligations and other liabilities of their
own, CMS Energys rights and the rights of its creditors and its stockholders to participate in the
distribution of assets of any subsidiary upon the latters liquidation or recapitalization will be
subject to prior claims of the subsidiarys creditors, except to the extent that CMS Energy may
itself be a creditor with recognized claims against the subsidiary.
Subdivision or Combination
If CMS Energy subdivides (by stock split, stock dividend or otherwise) or combines (by reverse
stock split or otherwise) the outstanding shares of CMS Energy Common Stock, the voting and
liquidation rights of shares of CMS Energy Common Stock will be appropriately adjusted so as to
avoid any dilution in aggregate voting or liquidation rights.
Exchanges
The CMS Energy Articles of Incorporation do not provide for either the mandatory or optional
exchange or redemption of CMS Energy Common Stock.
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Transfer Agent and Registrar
CMS Energy Common Stock is transferable at CMS Energy Corporation, One Energy Plaza, Jackson,
Michigan 49201. CMS Energy is the registrar and transfer agent for CMS Energy Common Stock.
Preferred Stock
The authorized Preferred Stock may be issued without the approval of the holders of CMS Energy
Common Stock in one or more series, from time to time, with each such series to have such
designation, powers, preferences and relative, participating, optional or other special rights,
voting rights, if any, and qualifications, limitations or restrictions thereof, as shall be stated
in a resolution providing for the issue of any such series adopted by CMS Energys board of
directors. The CMS Energy Articles of Incorporation provide that holders of Preferred Stock will
not have any preemptive rights to subscribe for or purchase any additional shares of the capital
stock of CMS Energy of any class now or hereafter authorized, or any Preferred Stock, bonds,
debentures or other obligations or rights or options convertible into or exchangeable for or
entitling the holder or owner to subscribe for or purchase any shares of capital stock. The future
issuance of Preferred Stock may have the effect of delaying, deterring or preventing a change in
control of CMS Energy.
Cumulative Convertible Preferred Stock
The CMS Energy Articles of Incorporation establish one series of preferred stock designated as
4.50% Cumulative Convertible Preferred Stock consisting of 5,000,000 shares with a liquidation
preference of $50.00 per share. The Cumulative Convertible Preferred Stock ranks prior to any
series of CMS Energy Common Stock as to the payment of dividends and distribution of assets upon
dissolution, liquidation or winding up of CMS Energy and is convertible into shares of CMS Energy
Common Stock. The holders of the Cumulative Convertible Preferred Stock have no preemptive rights.
Dividends
Holders of shares of Cumulative Convertible Preferred Stock will be entitled to receive, when,
as and if declared by CMS Energys board of directors out of funds legally available for payment,
cumulative cash dividends at the rate per annum of 4.50% per share on the liquidation preference
thereof of $50.00 per share (equivalent to $2.25 per annum per share). Dividends on the Cumulative
Convertible Preferred Stock will be payable quarterly in arrears on March 1, June 1, September 1
and December 1 of each year at such annual rate, and shall accumulate from the most recent date as
to which dividends shall have been paid or, if no dividends have been paid, from the issue date of
the Cumulative Convertible Preferred Stock, whether or not in any dividend period or periods there
have been funds legally available for the payment of such dividends. Accumulated unpaid dividends
accrue and cumulate dividends at the annual rate of 4.50%.
As long as any Cumulative Convertible Preferred Stock is outstanding, we may not pay dividends
or distributions on, or purchase, redeem or otherwise acquire, subject to certain exceptions,
shares of the CMS Energy Common Stock unless all accumulated and unpaid dividends on the Cumulative
Convertible Preferred Stock have been paid or set aside for payment.
Liquidation Preference
In the event of our voluntary or involuntary liquidation, winding-up or dissolution, holders
of Cumulative Convertible Preferred Stock will be entitled to receive and to be paid out of our
assets available for distribution to our stockholders, before any payment or distribution is made
to holders of junior stock (including CMS Energy Common Stock), a liquidation preference in the
amount of $50.00 per share of Cumulative Convertible Preferred Stock, plus accumulated and unpaid
dividends on the shares to the date fixed for liquidation, winding-up or dissolution. If, upon our
voluntary or involuntary liquidation, winding-up or dissolution, the amounts payable with respect
to the liquidation preference of the Cumulative Convertible Preferred Stock and all parity stock
are not paid in full, the holders of the Cumulative Convertible Preferred Stock and the parity
stock will share equally and ratably
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in any distribution of our assets in proportion to the full liquidation preference and
accumulated and unpaid dividends to which they are entitled.
Voting Rights
Except as required by Michigan law and the CMS Energy Articles of Incorporation, the holders
of Cumulative Convertible Preferred Stock have no voting rights unless dividends payable on the
Cumulative Convertible Preferred Stock are in arrears for six or more quarterly periods (whether or
not consecutive). In that event, the holders of the Cumulative Convertible Preferred Stock, voting
as a single class with the shares of any other Preferred Stock or preference securities having
similar voting rights that are exercisable, will be entitled at the next regular or special meeting
of our stockholders to elect two additional directors (or one director if fewer than six directors
comprise our board prior to appointment), and the number of directors that comprise our board will
be increased by the number of directors so elected. These voting rights and the terms of the
directors so elected will continue until such time as the dividend arrearage on the Cumulative
Convertible Preferred Stock has been paid in full.
Redemption
We cannot redeem shares of the Cumulative Convertible Preferred Stock.
Mandatory Conversion
On or after December 5, 2008, we may, at our option, cause the Cumulative Convertible
Preferred Stock to be automatically converted into that number of shares of CMS Energy Common Stock
for each share of Cumulative Convertible Preferred Stock equal to $50.00 (the liquidation
preference) divided by the applicable conversion rate with any resulting fractional share being
paid for in cash. We may exercise our conversion right only if, for 20 trading days within any
period of 30 consecutive trading days (including the last trading day of such 30-day period), the
closing price of the CMS Energy Common Stock exceeds 130% of the then-prevailing conversion price
of the Cumulative Convertible Preferred Stock.
Conversion Rights
A holder of record of Cumulative Convertible Preferred Stock may convert its shares of
Cumulative Convertible Preferred Stock at any time into shares of CMS Energy Common Stock under any
of the following circumstances:
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during any calendar quarter (and only during such calendar quarter) if the last
reported sale price of CMS Energy Common Stock for at least 20 trading days during the
period of 30 consecutive trading days ending on the last trading day of the previous
calendar quarter is greater than or equal to 120% of the conversion price per share of
CMS Energy Common Stock on such last trading day; |
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upon the occurrence of specified corporate transactions; and |
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subject to certain exceptions, during the five business day period immediately
following any ten consecutive trading-day period in which the trading price per share
of Cumulative Convertible Preferred Stock for each day of that period was less than 95%
of the product of the closing sale price of CMS Energy Common Stock and the applicable
conversion rate of such share of Cumulative Convertible Preferred Stock; provided,
however, a holder may not convert its shares of Cumulative Convertible Preferred Stock
if the average closing sale price of CMS Energy Common Stock for such ten consecutive
trading-day period was between the then current conversion price on the Cumulative
Convertible Preferred Stock and 120% of the then applicable conversion price on the
Cumulative Convertible Preferred Stock. |
For each share of Cumulative Convertible Preferred Stock surrendered for conversion, holders
will receive value equivalent to 5.0541 shares of CMS Energy Common Stock. This represents an
initial conversion price of
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$9.893 per share of CMS Energy Common Stock. The conversion rate may be adjusted for certain
reasons, but it will not be adjusted for accumulated and unpaid dividends on the Preferred Stock.
Primary Source of Funds of CMS Energy; Restrictions on Sources of Dividends
The ability of CMS Energy to pay (i) dividends on its capital stock and (ii) its indebtedness,
including the CMS Energy Debt Securities, depends and will depend substantially upon timely receipt
of sufficient dividends or other distributions from its subsidiaries, in particular Consumers and
Enterprises. Each of Consumers and Enterprises ability to pay dividends on its common stock
depends upon its revenues, earnings and other factors. Consumers revenues and earnings will
depend substantially upon rates authorized by the Michigan Public Service Commission.
CMS Energy has pledged the common stock of Consumers as security for bank credit facilities.
Consumers Restated Articles of Incorporation (the Consumers Articles of Incorporation)
provide two restrictions on its payment of dividends on its common stock. First, prior to the
payment of any common stock dividend, Consumers must reserve retained earnings after giving effect
to such dividend payment of at least:
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$7.50 per share on all then outstanding shares of its preferred stock; |
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in respect to its Class A Preferred Stock, 7.5% of the aggregate amount
established by its board of directors to be payable on the shares of each series
thereof in the event of involuntary liquidation of Consumers; and |
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$7.50 per share on all then outstanding shares of all other stock over which
its preferred stock and Class A Preferred Stock do not have preference as to the
payment of dividends and as to assets. |
Second, dividend payments during the 12-month period ending with the month the proposed payment is
to be paid are limited to:
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50% of net income available for the payment of dividends during the Base Period
(as defined below), if the ratio of common stock and surplus to total capitalization
and surplus for 12 consecutive calendar months within the 14 calendar months
immediately preceding the proposed dividend payment (the Base Period), adjusted to
reflect the proposed dividend, is less than 20%; and |
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75% of net income available for the payment of dividends during the Base Period
if the ratio of common stock and surplus to total capitalization and surplus for the
Base Period, adjusted to reflect the proposed dividend, is at least 20% but less than
25%. |
The Consumers Articles of Incorporation also prohibit the payment of cash dividends on its
common stock if Consumers is in arrears on preferred stock dividend payments.
In addition, Michigan law prohibits payment of a dividend if, after giving it effect,
Consumers or Enterprises would not be able to pay its respective debts as they become due in the
usual course of business, or its respective total assets would be less than the sum of its
respective total liabilities plus, unless the respective articles of incorporation permit
otherwise, the amount that would be needed, if Consumers or Enterprises were to be dissolved at the
time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. Currently, it is Consumers
policy to pay annual dividends equal to 80% of its annual consolidated net income. Consumers
board of directors reserves the right to change this policy at any time.
CMS Energy Debt Securities
The CMS Energy Debt Securities offered by any prospectus supplement will be unsecured
obligations of CMS Energy and will be either senior or subordinated debt. Senior Debt Securities
will be issued under the Senior Debt Indenture and Subordinated Debt Securities will be issued
under the Subordinated Debt Indenture. The Senior
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Debt Indenture and the Subordinated Debt Indenture are sometimes referred to in this
prospectus individually as a CMS Energy Indenture and collectively as the CMS Energy
Indentures.
The following briefly summarizes the material provisions of the CMS Energy Indentures that
have been filed with the SEC and incorporated by reference in the registration statement of which
this prospectus is a part. This summary of the CMS Energy Indentures is not complete and is
qualified in its entirety by reference to the CMS Energy Indentures. You should read the more
detailed provisions of the applicable CMS Energy Indenture, including the defined terms, for
provisions that may be important to you. You should also read the particular terms of a series of
CMS Energy Debt Securities, which will be described in more detail in the applicable prospectus
supplement.
Unless otherwise provided in the applicable prospectus supplement, the trustee under the
Senior Debt Indenture and under the Subordinated Debt Indenture will be The Bank of New York
Mellon.
General
The CMS Energy Indentures provide that CMS Energy Debt Securities may be issued in one or more
series, with different terms, in each case as authorized from time to time by CMS Energy. The CMS
Energy Indentures do not limit the aggregate principal amount of CMS Energy Debt Securities that
may be issued under the CMS Energy Indentures and provide that the CMS Energy Debt Securities may
be issued from time to time in one or more series. All securities issued under the relevant CMS
Energy Indenture will rank equally and ratably with all other securities issued under such CMS
Energy Indenture.
Federal income tax consequences and other special considerations applicable to any CMS Energy
Debt Securities issued at a discount will be described in the applicable prospectus supplement.
Because CMS Energy is a holding company, the claims of creditors of CMS Energys subsidiaries
will have a priority over CMS Energys equity rights and the rights of CMS Energys creditors,
including the holders of CMS Energy Debt Securities, to participate in the assets of the subsidiary
upon the subsidiarys liquidation.
The applicable prospectus supplement relating to any series of CMS Energy Debt Securities will
describe the following terms, where applicable:
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the title of the CMS Energy Debt Securities; |
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whether the CMS Energy Debt Securities will be senior or subordinated debt; |
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the total principal amount of the CMS Energy Debt Securities of such series
that may be issued; |
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the percentage of the principal amount at which the CMS Energy Debt Securities
will be sold and, if applicable, the method of determining the price; |
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the maturity date or dates; |
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the interest rate or the method of computing the interest rate; |
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the date or dates from which any interest will accrue, or how such date or
dates will be determined, and the interest payment date or dates and any related record
dates; |
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the place or places where the principal of and any interest on such CMS Energy
Debt Securities of such series will be payable; |
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any right of CMS Energy to redeem such CMS Energy Debt Securities of such
series and the terms and conditions of any such redemption; |
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any obligation of CMS Energy to redeem, purchase or repay the CMS Energy Debt
Securities at the option of a holder upon the happening of any event and the terms and
conditions of any such redemption, purchase or repayment; |
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any obligation of CMS Energy to permit the conversion of such CMS Energy Debt
Securities into CMS Energy Common Stock and the terms and conditions upon which such
conversion shall be effected; |
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whether the CMS Energy Debt Securities of such series will be issued in
book-entry form and the terms and any conditions for exchanging the global security in
whole or in part for paper certificates; |
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any material provisions of the applicable indenture described in this
prospectus that do not apply to the CMS Energy Debt Securities of such series; |
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any additional amounts with respect to the CMS Energy Debt Securities of such
series that CMS Energy will pay to a non-United States person because of any tax,
assessment or governmental charge withheld or deducted and, if so, any option of CMS
Energy to redeem the CMS Energy Debt Securities of such series rather than paying these
additional amounts; and |
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any other specific terms of the CMS Energy Debt Securities of such series. |
The CMS Energy Indentures provide that all CMS Energy Debt Securities of any one series need
not be issued at the same time, and CMS Energy may, from time to time, issue additional CMS Energy
Debt Securities of a previously issued series without consent of, and without notifying, the
holders of other CMS Energy Debt Securities. In addition, the CMS Energy Indentures provide that
CMS Energy may issue CMS Energy Debt Securities with terms different from those of any other series
of CMS Energy Debt Securities and, within a series of CMS Energy Debt Securities, certain terms
(such as interest rate or manner in which interest is calculated and maturity date) may differ.
Concerning the Trustees
The Bank of New York Mellon, the trustee under the Senior Debt Indenture and the Subordinated
Debt Indenture, is one of a number of banks with which CMS Energy and its subsidiaries maintain
ordinary banking relationships, including credit facilities.
Exchange and Transfer
CMS Energy Debt Securities may be presented for exchange and registered CMS Energy Debt
Securities may be presented for registration of transfer at the office or agency maintained for
that purpose subject to the restrictions set forth in any such CMS Energy Debt Securities and in
the applicable prospectus supplement without service charge, but upon payment of any taxes or other
governmental charges due in connection therewith, subject to any limitations contained in the
applicable indenture. CMS Energy Debt Securities in bearer form and the coupons appertaining
thereto, if any, will be transferable by delivery as provided in the applicable CMS Energy
Indenture.
Payment
Payments of principal of and any interest on CMS Energy Debt Securities in registered form
will be made at the office or agency of the applicable trustee in the Borough of Manhattan, The
City of New York or its other designated office. However, at the option of CMS Energy, payment of
any interest may be made by check or by wire transfer. Payment of any interest due on CMS Energy
Debt Securities in registered form will be made to the persons in whose name the CMS Energy Debt
Securities are registered at the close of business on the record date for such interest payments.
Payments to be made in any other manner will be specified in the applicable prospectus supplement.
Events of Default
Each CMS Energy Indenture provides that events of default regarding any series of CMS Energy
Debt Securities will be:
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failure to pay required interest on any CMS Energy Debt Security of such series
for 30 days; |
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failure to pay principal other than a scheduled installment payment or premium,
if any, on any CMS Energy Debt Security of such series when due; |
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failure to make any required scheduled installment payment for 30 days on CMS
Energy Debt Securities of such series; |
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failure to deposit any sinking fund when due in respect of the CMS Energy Debt
Securities of such series; |
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failure to perform any other covenant in the relevant indenture other than a
covenant included in the relevant indenture solely for the benefit of a series of CMS
Energy Debt Securities other than |
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such series continued for 60 days after written notice by the trustee to CMS Energy
or by the holders of at least 25% in aggregate principal amount of the outstanding
CMS Energy Debt Securities of all series affected thereby to CMS Energy and the
trustee as provided in the applicable CMS Energy Indenture; |
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certain events of bankruptcy or insolvency, whether voluntary or not; |
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entry of final judgments against CMS Energy or Consumers for more than
$25,000,000 that remain undischarged or unbonded for 60 days; or |
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a default resulting in the acceleration of indebtedness of CMS Energy or
Consumers of more than $25,000,000, and the acceleration has not been rescinded or
annulled within 10 days after written notice of such default by the trustee to CMS
Energy or by the holders of at least 10% in aggregate principal amount of the
outstanding CMS Energy Debt Securities of that series to CMS Energy and the trustee as
provided in the applicable CMS Energy Indenture. |
Additional events of default may be prescribed for the benefit of the holders of a particular
series of CMS Energy Debt Securities and will be described in the prospectus supplement relating to
those CMS Energy Debt Securities.
If an event of default regarding CMS Energy Debt Securities of any series issued under the CMS
Energy Indentures should occur and be continuing, either the trustee or the holders of at least 25%
in the principal amount of outstanding CMS Energy Debt Securities of such series may declare each
CMS Energy Debt Security of that series due and payable.
Holders of a majority in principal amount of the outstanding CMS Energy Debt Securities of
each series affected will be entitled to control certain actions of the trustee under the CMS
Energy Indentures and to waive past defaults regarding such series. The trustee generally will not
be requested, ordered or directed by any of the holders of CMS Energy Debt Securities, unless one
or more of such holders shall have offered to the trustee reasonable security or indemnity.
Before any holder of any series of CMS Energy Debt Securities may institute action for any
remedy, except payment on such holders CMS Energy Debt Security when due, the holders of not less
than 25% in aggregate principal amount of the CMS Energy Debt Securities of each affected series
then outstanding must request the trustee to take action. Holders must also offer the trustee
reasonable indemnity against costs, expenses and liabilities incurred by the trustee for taking
such action.
CMS Energy is required to annually furnish the relevant trustee a statement as to CMS Energys
compliance with all conditions and covenants under the applicable CMS Energy Indenture. Each CMS
Energy Indenture provides that the relevant trustee may withhold notice to the holders of the CMS
Energy Debt Securities of any series of any default affecting such series, except payment of
principal of, interest on or any sinking fund installment on CMS Energy Debt Securities of such
series when due, if it considers withholding notice to be in the interests of the holders of the
CMS Energy Debt Securities of such series.
Consolidation, Merger or Sale of Assets
Each CMS Energy Indenture provides that CMS Energy may consolidate with or merge into, or
sell, lease or convey its property as an entirety or substantially as an entirety to, any other
corporation if the new corporation assumes the obligations of CMS Energy under the CMS Energy Debt
Securities and the CMS Energy Indentures and is organized and existing under the laws of the United
States of America, any U.S. state or the District of Columbia, and after giving effect to the
transaction no event of default under the applicable CMS Energy Indenture has occurred and is
continuing, and certain other conditions are met.
Modification of the Indenture
Each CMS Energy Indenture permits CMS Energy and the relevant trustee to enter into
supplemental indentures without the consent of the holders of the CMS Energy Debt Securities:
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to establish the form and terms of any series of securities under that CMS Energy Indenture; |
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to cure any ambiguity; |
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to provide for a successor to CMS Energy to assume the applicable CMS Energy
Indenture; |
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to add covenants of CMS Energy for the benefit of the holders of any series of
CMS Energy Debt Securities; and |
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to provide for a successor trustee. |
Each CMS Energy Indenture also permits CMS Energy and the relevant trustee, with the consent
of the holders of a majority in aggregate principal amount of the CMS Energy Debt Securities of all
series then outstanding and affected (voting as one class), to change in any manner the provisions
of the applicable CMS Energy Indenture or modify in any manner the rights of the holders of the CMS
Energy Debt Securities of each such affected series. CMS Energy and the relevant trustee may not,
without the consent of the holder of each CMS Energy Debt Security affected, enter into any
supplemental indenture to:
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change the time of payment of the principal of such CMS Energy Debt Security; |
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reduce the principal amount or amount payable upon redemption, if any, of such
CMS Energy Debt Security; |
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reduce the rate or change the time of payment of interest on such CMS Energy
Debt Security; |
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change the currency of payment of principal of or interest on such CMS Energy
Debt Security; |
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reduce the amount payable on any securities issued originally at a discount
upon acceleration or provable in bankruptcy; or |
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impair the right to institute suit for the enforcement of any payment on any
CMS Energy Debt Security when due. |
In addition, no such modification may reduce the percentage in principal amount of the CMS
Energy Debt Securities of the affected series, the consent of whose holders is required for any
such modification or for any waiver provided for in the applicable CMS Energy Indenture.
Prior to the acceleration of the maturity of any CMS Energy Debt Security, the holders, voting
as one class, of a majority in aggregate principal amount of the CMS Energy Debt Securities of all
series then outstanding with respect to which a default or event of default shall have occurred and
be continuing may on behalf of the holders of all such affected CMS Energy Debt Securities waive
any past default or event of default and its consequences, except a default or an event of default
in respect of the payment of the principal of or interest on any CMS Energy Debt Security of such
series or in respect of a covenant or provision of the applicable CMS Energy Indenture or of any
CMS Energy Debt Security that cannot be modified or amended without the consent of the holder of
each CMS Energy Debt Security affected.
Defeasance, Covenant Defeasance and Discharge
Each CMS Energy Indenture provides that, at the option of CMS Energy:
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CMS Energy will be discharged from all obligations in respect of the CMS Energy
Debt Securities of a particular series then outstanding (except for certain obligations
to register the transfer of or exchange the CMS Energy Debt Securities of such series,
to replace stolen, lost or mutilated CMS Energy Debt Securities of such series, to
maintain paying agencies and to maintain the trust described below); or |
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CMS Energy need not comply with certain restrictive covenants of the relevant
CMS Energy Indenture (including those described under Consolidation, Merger or Sale of
Assets above), |
if CMS Energy in each case irrevocably deposits in trust with the relevant trustee money or
Government Obligations (as defined in the CMS Energy Indentures), maturing as to principal and
interest at such times and in such amounts as will insure the availability of money, or a
combination of money and Government Obligations, sufficient in the opinion of a nationally
recognized firm of independent public accountants to pay all the principal and interest on the CMS
Energy Debt Securities of such series, or any sinking fund payment, on the stated maturities of
such CMS Energy Debt Securities in accordance with the terms thereof.
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To exercise this option, CMS Energy is required to deliver to the relevant trustee an opinion
of independent counsel to the effect that:
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the exercise of such option would not cause the holders of the CMS Energy Debt
Securities of such series to recognize income, gain or loss for United States federal
income tax purposes as a result of such defeasance, and such holders will be subject to
United States federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance had not occurred; and |
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in the case of a discharge under the Senior Debt Indenture, such opinion shall
also be to the effect that (i) a ruling to the same effect has been received from or
published by the Internal Revenue Service or (ii) since the date of the applicable CMS
Energy Indenture there has been a change in the applicable federal income tax law. |
In the event:
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CMS Energy exercises its option to effect a covenant defeasance with respect to
the CMS Energy Debt Securities of any series as described above; |
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the CMS Energy Debt Securities of such series are thereafter declared due and
payable because of the occurrence of any event of default other than an event of
default caused by failing to comply with the covenants that are defeased; or |
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the amount of money and securities on deposit with the relevant trustee would
be insufficient to pay amounts due on the CMS Energy Debt Securities of such series at
the time of the acceleration resulting from such event of default, |
CMS Energy would remain liable for such amounts.
Governing Law
Each CMS Energy Indenture and the CMS Energy Debt Securities will be governed by, and
construed in accordance with, the laws of the State of Michigan unless the laws of another
jurisdiction shall mandatorily apply.
Senior Debt Securities
The Senior Debt Securities will be issued under the Senior Debt Indenture and will rank on an
equal basis with all other unsecured debt of CMS Energy except subordinated debt.
Subordinated Debt Securities
The Subordinated Debt Securities will be issued under the Subordinated Debt Indenture and will
rank subordinated and junior in right of payment in full, to the extent set forth in the
Subordinated Debt Indenture, to all Senior Indebtedness (as defined herein) of CMS Energy.
If CMS Energy defaults in the payment of principal of, or interest on, any Senior Indebtedness
when it becomes due and payable after any applicable grace period or in the event any judicial
proceeding is pending with respect to any such default, then, unless and until the default is cured
or waived or ceases to exist, CMS Energy cannot make a payment with respect to the principal of, or
interest on, Subordinated Debt Securities or acquire any Subordinated Debt Securities or on account
of any sinking fund provisions. The provisions of the Subordinated Debt Indenture described in
this paragraph, however, do not prevent CMS Energy from making payments in CMS Energy capital stock
or certain rights to acquire CMS Energy capital stock or sinking fund payments in Subordinated Debt
Securities acquired prior to the maturity of Senior Indebtedness or, in the case of default, prior
to such default and notice thereof and payments made through the exchange of other debt obligations
of CMS Energy for the Subordinated Debt Securities. If there is any dissolution, insolvency,
bankruptcy, liquidation or other similar proceeding relating to CMS Energy, its creditors or its
property, then all Senior Indebtedness must be paid in full before any payment may be made to any
holders of Subordinated Debt Securities. Holders of Subordinated Debt Securities must return and
deliver any payments received by them, other than in a plan of reorganization or through
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a defeasance trust as described above, directly to the holders of Senior Indebtedness until
all Senior Indebtedness is paid in full.
Senior Indebtedness means the principal of and premium, if any, and interest on the
following, whether outstanding on the date of execution of the Subordinated Debt Indenture or
thereafter incurred, created or assumed:
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indebtedness of CMS Energy for money borrowed by CMS Energy (including purchase
money obligations) or evidenced by debentures (other than the Subordinated Debt
Securities), notes, bankers acceptances or other corporate debt securities or similar
instruments issued by CMS Energy; |
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all capital lease obligations of CMS Energy; |
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all obligations of CMS Energy issued or assumed as deferred purchase price of
property, all conditional sale obligations of CMS Energy and all obligations of CMS
Energy under title retention agreement (but excluding trade accounts payable arising in
the ordinary course of business); |
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obligations of CMS Energy with respect to letters of credit; |
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all indebtedness of others of the type referred to in the four preceding
clauses assumed by or guaranteed in any manner by CMS Energy or in effect guaranteed by
CMS Energy; |
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all obligations of the type referred to in the five preceding clauses of other
persons secured by any lien on any property or asset of CMS Energy (subject to certain
exceptions); or |
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renewals, extensions or refundings of any of the indebtedness referred to in
the preceding six clauses unless, in the case of any particular indebtedness, renewal,
extension or refunding, under the express provisions of the instrument creating or
evidencing the same or the assumption or guarantee of the same, or pursuant to which
the same is outstanding, such indebtedness or such renewal, extension or refunding
thereof is not superior in right of payment to the Subordinated Debt Securities. |
The Subordinated Debt Indenture does not limit the total amount of Senior Indebtedness that
may be issued.
Certain Covenants
If Subordinated Debt Securities are issued to a Trust or a trustee of such Trust in connection
with the issuance of Trust Preferred Securities by such Trust, and if at such time:
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there shall have occurred any event of which CMS Energy has actual knowledge
(i) with the giving of notice or the lapse of time, or both, would constitute an event
of default under the Subordinated Debt Indenture and (ii) in respect of which CMS
Energy shall not have taken reasonable steps to cure; |
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CMS Energy shall be in default with respect to its payment of any obligations
under the Guarantees; or |
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CMS Energy shall have given notice of its election to defer payments of
interest on such Subordinated Debt Securities as provided in the Subordinated Debt
Indenture and shall not have rescinded such notice, or such extension period, or any
extension thereof, shall be continuing, |
then CMS Energy will not, and it will cause its subsidiaries to not:
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declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of CMS Energys capital stock; or |
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make any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any debt securities (including guarantees of indebtedness for
money borrowed) of CMS Energy that rank pari passu with or junior to the Subordinated
Debt Securities, |
other than:
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any dividend, redemption, liquidation, interest, principal or guarantee payment
by CMS Energy where the payment is made by way of securities (including capital stock)
that rank pari passu with or junior to the securities on which such dividend,
redemption, liquidation, interest, principal or guarantee payment is being made; |
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payments under the Guarantees; |
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purchases of CMS Energy Common Stock related to the issuance of CMS Energy
Common Stock under any of CMS Energys benefit plans for its directors, officers or
employees; |
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as a result of a reclassification of CMS Energys capital stock or the exchange
or conversion of one series or class of CMS Energys capital stock for another series
or class of CMS Energys capital stock; and |
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the purchase of fractional interests in shares of CMS Energys capital stock
pursuant to the conversion or exchange provisions of such capital stock or the security
being converted or exchanged. |
CMS Energy also covenants:
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that for so long as Trust Preferred Securities are outstanding, not to convert
the Subordinated Debt Securities except pursuant to a notice of conversion delivered to
the conversion agent by a holder of Trust Preferred Securities; |
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to maintain directly or indirectly 100% ownership of the Common Securities,
provided that certain successors that are permitted pursuant to the Subordinated Debt
Indenture may succeed to CMS Energys ownership of the Common Securities; |
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not to voluntarily terminate, wind-up or liquidate such Trust, except (i) in
connection with a distribution of Subordinated Debt Securities to the holders of the
Trust Preferred Securities in liquidation of such Trust or (ii) in connection with
certain mergers, consolidations or amalgamations permitted by the declaration of trust
or other governing instrument of such Trust; |
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to maintain the reservation for issuance of the number of shares of CMS Energy
Common Stock that would be required from time to time upon the conversion of all the
CMS Energy Debt Securities then outstanding; |
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to use its reasonable efforts, consistent with the terms and provisions of the
declaration of trust or other governing instrument of such Trust, to cause such Trust
to remain classified as a business trust and not as an association taxable as a
corporation for United States federal income tax purposes; and |
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to deliver shares of CMS Energy Common Stock upon an election by the holders of
the Trust Preferred Securities to convert such Trust Preferred Securities into CMS
Energy Common Stock. |
As part of the Guarantees, CMS Energy will agree that it will honor all obligations described
therein relating to the conversion or exchange of the Trust Preferred Securities into or for CMS
Energy Common Stock, Senior Debt Securities or Subordinated Debt Securities.
Conversion Rights
If the prospectus supplement so provides, the holders of CMS Energy Debt Securities may
convert such CMS Energy Debt Securities into CMS Energy Common Stock at the option of the holders
at the principal amount thereof, or of such portion thereof, at any time during the period
specified in the prospectus supplement, at the conversion price or conversion rate specified in the
prospectus supplement; except that, with respect to any CMS Energy Debt Securities (or portion
thereof) called for redemption, such conversion right shall terminate at the close of business on
the fifteenth day prior to the date fixed for redemption of such CMS Energy Debt Security, unless
CMS Energy shall default in payment of the amount due upon redemption thereof.
The conversion privilege and conversion price or conversion rate will be adjusted in certain
events, including if CMS Energy:
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pays a dividend or makes a distribution in shares of CMS Energy Common Stock; |
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subdivides its outstanding shares of CMS Energy Common Stock into a greater
number of shares; |
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combines its outstanding shares of CMS Energy Common Stock into a smaller
number of shares; |
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pays a dividend or makes a distribution on its CMS Energy Common Stock other
than in shares of its CMS Energy Common Stock; |
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issues by reclassification of its shares of CMS Energy Common Stock any shares
of its capital stock; |
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issues any rights or warrants to all holders of shares of its CMS Energy Common
Stock entitling them (for a period expiring within 45 days, or such other period as may
be specified in the prospectus supplement) to purchase shares of CMS Energy Common
Stock (or Convertible Securities as defined in the CMS Energy Indentures) at a price
per share less than the Average Market Price (as defined in the CMS Energy Indentures)
per share for such CMS Energy Common Stock; or |
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distributes to all holders of shares of its CMS Energy Common Stock any assets
or debt securities or any rights or warrants to purchase securities; |
provided, that no adjustment shall be made under the last two bullet points above if the adjusted
conversion price would be higher than, or the adjusted conversion rate would be less than, the
conversion price or conversion rate, as the case may be, in effect prior to such adjustment.
CMS Energy may reduce the conversion price or increase the conversion rate, temporarily or
otherwise, by any amount, but in no event shall such adjusted conversion price or conversion rate
result in shares of CMS Energy Common Stock being issuable upon conversion of the CMS Energy Debt
Securities if converted at the time of such adjustment at an effective conversion price per share
less than the par value of the CMS Energy Common Stock at the time such adjustment is made. No
adjustments in the conversion price or conversion rate need be made unless the adjustment would
require an increase or decrease of at least 1% in the initial conversion price or conversion rate.
Any adjustment that is not made shall be carried forward and taken into account in any subsequent
adjustment. The foregoing conversion provisions may be modified to the extent set forth in the
prospectus supplement.
Description of Stock Purchase Contracts and Stock Purchase Units
CMS Energy may issue Stock Purchase Contracts, representing contracts obligating holders to
purchase from CMS Energy, and CMS Energy to sell to the holders, a specified number of shares of
CMS Energy Common Stock at a future date or dates. The price per share of CMS Energy Common Stock
may be fixed at the time the Stock Purchase Contracts are issued or may be determined by reference
to a specific formula set forth in the Stock Purchase Contracts. The Stock Purchase Contracts may
be issued separately or as part of Stock Purchase Units consisting of a Stock Purchase Contract and
Senior Debt Securities, Subordinated Debt Securities, Trust Preferred Securities or debt
obligations of third parties, including U.S. Treasury securities, securing the holders obligations
to purchase the CMS Energy Common Stock under the Stock Purchase Contracts. The Stock Purchase
Contracts may require CMS Energy to make periodic payments to the holders of the Stock Purchase
Units or vice versa, and such payments may be unsecured or refunded on some basis. The Stock
Purchase Contracts may require holders to secure their obligations thereunder in a specified
manner.
The applicable prospectus supplement will describe the terms of any Stock Purchase Contracts
or Stock Purchase Units. The description in the prospectus supplement will not purport to be
complete and will be qualified in its entirety by reference to the Stock Purchase Contracts, and,
if applicable, collateral arrangements and depositary arrangements, relating to such Stock Purchase
Contracts or Stock Purchase Units.
THE TRUSTS
The undivided common beneficial interests in the Trust will be owned by CMS Energy. The net
proceeds received by each of the Trusts from the sale of its Trust Preferred Securities or Common
Securities will be used to purchase from CMS Energy its Senior Debt Securities or Subordinated Debt
Securities in an aggregate principal amount equal to the aggregate liquidation preference of the
Trust Securities, bearing interest at an annual rate equal to the annual distribution rate of such
Trust Securities and having certain redemption terms that correspond to the redemption terms for
the Trust Securities. The Senior Debt Securities of CMS Energy will rank on an equal basis with
all other unsecured debt of CMS Energy except subordinated debt. The Subordinated Debt Securities
of CMS Energy will rank subordinate in right of payment to all of CMS Energys Senior Indebtedness.
Distributions on the Trust Securities may not be made unless the Trust
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receives corresponding interest payments on such Senior Debt Securities or Subordinated Debt
Securities from CMS Energy. CMS Energy will irrevocably guarantee, on a senior or subordinated
basis, as applicable, and to the extent set forth therein, with respect to each of the Trust
Securities, the payment of distributions, the redemption price, including all accrued or deferred
and unpaid distributions, and payment on liquidation, but only to the extent of funds on hand.
Each Guarantee of CMS Energy will be unsecured and will be either equal to or subordinate to, as
applicable, all Senior Indebtedness of CMS Energy. Upon the occurrence of certain events (subject
to the conditions to be described in an accompanying prospectus supplement), the Trust may be
liquidated, and the holders of the Trust Securities could receive Senior Debt Securities or
Subordinated Debt Securities of CMS Energy in lieu of any liquidating cash distribution.
Pursuant to the Trust Agreement, the number of CMS Energy Trustees will initially be three.
Two of the CMS Energy Trustees will be persons who are employees or officers of or who are
affiliated with CMS Energy (the Administrative Trustees). The third trustee will be a financial
institution that is unaffiliated with CMS Energy, which trustee will serve as property trustee
under the Trust Agreement and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act (the Property Trustee). Initially, The Bank of New York
Mellon, a New York banking corporation, will be the Property Trustee, until removed or replaced by
the holder of the Common Securities. For the purpose of compliance with the provisions of the
Trust Indenture Act, The Bank of New York Mellon will also act as trustee (a Guarantee Trustee).
BNY Mellon Trust of Delaware will act as the Delaware Trustee for the purposes of the Delaware
Statutory Trust Act, until removed or replaced by the holder of the Common Securities. See Effect
of Obligations Under the CMS Energy Debt Securities and the GuaranteesThe CMS Energy Guarantees
below.
The Property Trustee will hold title to the applicable CMS Energy Debt Securities for the
benefit of the holders of the Trust Securities, and the Property Trustee will have the power to
exercise all rights, powers and privileges under the applicable CMS Energy Indenture as the holder
of the CMS Energy Debt Securities. In addition, the Property Trustee will maintain exclusive
control of a segregated non-interest-bearing bank account (the Property Account) to hold all
payments made in respect of the CMS Energy Debt Securities for the benefit of the holders of the
Trust Securities. The Property Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities out of funds from the
Property Account. The Guarantee Trustee will hold the Guarantees of CMS Energy for the benefit of
the holders of the Trust Securities. CMS Energy, as the direct or indirect holder of all of the
Common Securities, will have the right to appoint, remove or replace any CMS Energy Trustee and to
increase or decrease the number of CMS Energy Trustees; provided, that the number of CMS Energy
Trustees shall be at least three, a majority of which shall be Administrative Trustees. CMS Energy
will pay all fees and expenses related to the Trusts and the offering of the Trust Securities.
The rights of the holders of the Trust Preferred Securities, including economic rights, rights
to information and voting rights, are set forth in the Trust Agreement, the Delaware Statutory
Trust Act and the Trust Indenture Act.
The trustee in the State of Delaware is BNY Mellon Trust of Delaware (formerly The Bank of New
York Mellon Delaware), White Clay Center, Route 273, Newark, Delaware 19711.
Trust Preferred Securities
Each Trust may issue, from time to time, Trust Preferred Securities having terms described in
the applicable prospectus supplement. The Trust Agreement of each Trust will authorize the
establishment of no more than one series of Trust Preferred Securities, having such terms,
including distributions, redemption, voting, liquidation rights and such other preferred, deferred
or other special rights or such rights or restrictions as shall be set forth therein or otherwise
established by the relevant Trusts trustees. Reference is made to the prospectus supplement
relating to the Trust Preferred Securities for specific terms, including:
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the distinctive designation and the number of Trust Preferred Securities to be
offered that will represent undivided beneficial interests in the assets of the Trust; |
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the annual distribution rate and the date or dates upon which such
distributions will be paid; provided, however, distributions on the Trust Preferred
Securities will be paid quarterly in arrears |
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to holders of Trust Preferred Securities as of a record date on which the Trust
Preferred Securities are outstanding; |
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whether distributions on Trust Preferred Securities would be deferred during
any deferral of interest payments on the CMS Energy Debt Securities; provided, however,
that no such deferral, including extensions, if any, may exceed 20 consecutive quarters
nor extend beyond the stated maturity date of the CMS Energy Debt Securities, and, at
the end of any such deferrals, CMS Energy shall make all interest payments then accrued
or deferred and unpaid (including any compounded interest); |
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the amount of any liquidation preference; |
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the obligation, if any, of the Trust to redeem Trust Preferred Securities
through the exercise by CMS Energy of an option on the corresponding CMS Energy Debt
Securities and the price or prices at which, the period or periods within which, and
the terms and conditions upon which, Trust Preferred Securities shall be purchased or
redeemed, in whole or in part, pursuant to such obligation; |
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the period or periods within which, and the terms and conditions, if any,
including the price or prices or the rate or rates of conversion or exchange and the
terms and conditions of any adjustments thereof, upon which, the Trust Preferred
Securities shall be convertible or exchangeable at the option of the holder of the
Trust Preferred Securities for other property or cash; |
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the voting rights, if any, of the Trust Preferred Securities in addition to
those required by law and in the Trust Agreement or set forth under a Guarantee; |
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the additional payments, if any, that the Trust will pay as a distribution as
necessary so that the net amounts reserved by the Trust and distributable to the
holders of the Trust Preferred Securities, after all taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes) have been paid,
will not be less than the amount that would have been reserved and distributed by the
Trust, and the amount the holders of the Trust Preferred Securities would have
reserved, had no such taxes, duties, assessments or governmental charges been imposed; |
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the terms and conditions, if any, upon which the CMS Energy Debt Securities may
be distributed to holders of Trust Preferred Securities; and |
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any other relative rights, powers, preferences, privileges, limitations or
restrictions of the Trust Preferred Securities not inconsistent with the Trust
Agreement or applicable law. |
All Trust Preferred Securities offered hereby will be irrevocably guaranteed by CMS Energy, on a
senior or subordinated basis, as applicable, and to the extent set forth under Effect of
Obligations Under the CMS Energy Debt Securities and the GuaranteesThe CMS Energy Guarantees
below. Any applicable federal income tax considerations applicable to any offering of the Trust
Preferred Securities will be described in the prospectus supplement relating thereto. The
aggregate number of Trust Preferred Securities that the Trust shall have authority to issue will be
pursuant to the terms of the Trust Agreement.
Effect of Obligations Under the CMS Energy Debt Securities and the Guarantees
As set forth in the Trust Agreement, the sole purpose of each Trust is to issue the Trust
Securities evidencing undivided beneficial interests in the assets of each Trust and to use the
proceeds from such issuance and sale to acquire directly the CMS Energy Debt Securities from CMS
Energy.
As long as payments of interest and other payments are made when due on the CMS Energy Debt
Securities, such payments will be sufficient to cover distributions and payments due on the Trust
Securities because of the following factors:
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the aggregate principal amount of CMS Energy Debt Securities will be equal to
the sums of the aggregate stated liquidation amount of the Trust Securities; |
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the interest rate and the interest and other payment dates on the CMS Energy
Debt Securities will match the distribution rate and distribution and other payment
dates for the Trust Securities; |
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CMS Energy shall pay, and the Trust shall not be obligated to pay, directly or
indirectly, all costs, expenses, debt and obligations of the Trust (other than with
respect to the Trust Securities); and |
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the Trust Agreement further provides that the trustees shall not take or cause
or permit the Trust to, among other things, engage in any activity that is not
consistent with the purposes of the Trust. |
Payments of distributions (to the extent funds therefor are available) and other payments due
on the Trust Preferred Securities (to the extent funds therefor are available) are guaranteed by
CMS Energy as and to the extent set forth under The CMS Energy Guarantees below. If CMS Energy
does not make interest payments on the CMS Energy Debt Securities purchased by the Trust, it is
expected that the Trust will not have sufficient funds to pay distributions on the Trust Preferred
Securities. The Guarantees do not apply to any payment of distributions unless and until the Trust
has sufficient funds for the payment of distributions and other payments on the Trust Preferred
Securities only if and to the extent that CMS Energy has made a payment of interest or principal on
the CMS Energy Debt Securities held by the Trust as its sole asset. The Guarantees, when taken
together with CMS Energys obligations under the CMS Energy Debt Securities and the CMS Energy
Indenture and its obligations under the Trust Agreement, including its obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the Trusts securities),
provide a full and unconditional guarantee of amounts on the Trust Preferred Securities.
If CMS Energy fails to make interest or other payments on the CMS Energy Debt Securities when
due (taking account of any extension period), the Trust Agreement provides a mechanism whereby the
holders of the Trust Preferred Securities may direct the Property Trustee to enforce its rights
under the CMS Energy Debt Securities. If the Property Trustee fails to enforce its rights under
the CMS Energy Debt Securities, a holder of Trust Preferred Securities may institute a legal
proceeding against CMS Energy to enforce the Property Trustees rights under the CMS Energy Debt
Securities without first instituting any legal proceeding against the Property Trustee or any other
person or entity. Notwithstanding the foregoing, if an event of default has occurred and is
continuing under the Trust Agreement, and such event is attributable to the failure of CMS Energy
to pay interest or principal on the CMS Energy Debt Securities on the date such interest or
principal is otherwise payable (or in the case of redemption on the redemption date), then a holder
of Trust Preferred Securities may institute legal proceedings directly against CMS Energy to obtain
payment. If CMS Energy fails to make payments under the Guarantees, the Guarantees provide a
mechanism whereby the holders of the Trust Preferred Securities may direct the Guarantee Trustee to
enforce its rights thereunder. Any holder of Trust Preferred Securities may institute a legal
proceeding directly against CMS Energy to enforce the Guarantee Trustees rights under a Guarantee
without first instituting a legal proceeding against the Trust, the Guarantee Trustee or any other
person or entity.
The CMS Energy Guarantees
Set forth below is a summary of information concerning the Guarantees that will be executed
and delivered by CMS Energy for the benefit of the holders, from time to time, of the Trust
Preferred Securities. Each Guarantee will be qualified as an indenture under the Trust Indenture
Act. The Bank of New York Mellon, an independent trustee, will act as indenture trustee under the
Guarantees for the purpose of compliance with the provisions of the Trust Indenture Act. This
summary does not purport to be complete and is subject in all respects to the provisions of, and is
qualified in its entirety by reference to, the Guarantees, which are filed as exhibits to the
Registration Statement of which this prospectus forms a part.
General
CMS Energy will irrevocably and unconditionally agree to pay in full, on a senior or
subordinated basis, as applicable, the Guarantee Payments (as defined below) to the holders of the
Trust Preferred Securities, as and when due, regardless of any defense, right of set-off or
counterclaim that the Trust may have or assert other than the defense of payment. The following
payments with respect to the Trust Preferred Securities, to the extent not paid by or on behalf of
the Trust (the Guarantee Payments), will be subject to a Guarantee:
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any accumulated and unpaid distributions required to be paid on the Trust
Preferred Securities, to the extent that the Trust has funds on hand available therefor
at such time; |
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the redemption price with respect to any Trust Preferred Securities called for
redemption to the extent that the Trust has funds on hand available therefor; or |
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upon a voluntary or involuntary dissolution, winding up or liquidation of the
Trust (unless the CMS Energy Debt Securities are distributed to holders of the Trust
Preferred Securities), the lesser |
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of (i) the aggregate of the liquidation preference of $50 per Trust Preferred
Security plus accrued and unpaid distributions on the Trust Preferred Securities to
the date of payment, to the extent that the Trust has funds on hand available
therefor, and (ii) the amount of assets of the Trust remaining available for
distribution to holders of Trust Preferred Securities. |
CMS Energys obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts of CMS Energy to the holders of the Trust Preferred Securities or by causing the
Trust to pay such amount to such holders.
Such Guarantees will be irrevocable guarantees, on a senior or subordinated basis, as
applicable, of the Trusts obligations under the Trust Preferred Securities, but will apply only to
the extent that the Trust has funds sufficient to make such payments, and are not guarantees of
collection. If CMS Energy does not make interest payments on the CMS Energy Debt Securities held
by the Trust, the Trust will not be able to pay distributions on the Trust Preferred Securities and
will not have funds legally available therefor.
CMS Energy has, through the Guarantees, the Trust Agreements, the Senior Debt Securities, the
Subordinated Debt Securities, the CMS Energy Indentures and the related expense agreement, taken
together, fully, irrevocably and unconditionally guaranteed all of the Trusts obligations under
the Trust Preferred Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such Guarantee. It is only the combined
operation of these documents that has the effect of providing a full, irrevocable and unconditional
guarantee of the Trusts obligations under the Trust Preferred Securities.
CMS Energy has also agreed separately to irrevocably and unconditionally guarantee the
obligations of the Trust with respect to the Common Securities to the same extent as the
Guarantees, except that, upon the occurrence and during the continuation of a Trust Agreement event
of default, holders of Trust Preferred Securities shall have priority over holders of Common
Securities with respect to distributions and payments on liquidation, redemption or otherwise.
Certain Covenants of CMS Energy
CMS Energy will covenant in each Guarantee that if and so long as:
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the Trust is the holder of all the CMS Energy Debt Securities; |
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a Tax Event (as defined in the Guarantee) in respect of the Trust has occurred
and is continuing; and |
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CMS Energy has elected, and has not revoked such election, to pay Additional
Sums (as defined in the Guarantee) in respect of the Trust Preferred Securities and
Common Securities, |
CMS Energy will pay to the Trust such Additional Sums.
CMS Energy also covenants that if Subordinated Debt Securities are issued to a Trust or
trustee of such Trust in connection with the issuance of Trust Preferred Securities by such Trust
and, if at such time:
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there shall have occurred any event of which CMS Energy has actual knowledge
that (i) with the giving of notice or the lapse of time, or both, would constitute an
event of default under the Subordinated Debt Indenture and (ii) in respect of which CMS
Energy shall not have taken reasonable steps to cure; |
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CMS Energy shall be in default with respect to its payment of any obligations
under the Guarantees; or |
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CMS Energy shall have given notice of its election to defer payments of
interest on the Subordinated Debt Securities as provided in the Subordinated Debt
Indenture and shall not have rescinded such notice, or such extension period, or any
extension thereof, shall be continuing, |
then CMS Energy will not, and it will cause its subsidiaries to not:
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declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of CMS Energys capital stock; or |
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make any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any debt securities (including guarantees of indebtedness for
money borrowed) of CMS Energy that rank pari passu with or junior to the Subordinated
Debt Securities; |
other than:
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any dividend, redemption, liquidation, interest, principal or guarantee payment
by CMS Energy where the payment is made by way of securities (including capital stock)
that rank pari passu with or junior to the securities on which such dividend,
redemption, liquidation, interest, principal or guarantee payment is being made; |
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payments under the Guarantees; |
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purchases of CMS Energy Common Stock related to the issuance of CMS Energy
Common Stock under any of CMS Energys benefit plans for its directors, officers or
employees; |
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as a result of a reclassification of CMS Energys capital stock or the exchange
or conversion of one series or class of CMS Energys capital stock for another series
or class of CMS Energys capital stock; and |
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the purchase of fractional interests in shares of CMS Energys capital stock
pursuant to the conversion or exchange provisions of such capital stock or the security
being converted or exchanged. |
CMS Energy also covenants:
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that for so long as Trust Preferred Securities are outstanding, not to convert
Subordinated Debt Securities except pursuant to a notice of conversion delivered to the
conversion agent by a holder of Trust Preferred Securities; |
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to maintain directly or indirectly 100% ownership of the Common Securities,
provided that certain successors that are permitted pursuant to the Subordinated Debt
Indenture may succeed to CMS Energys ownership of the Common Securities; |
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to not voluntarily terminate, wind-up or liquidate the Trust, except (i) in
connection with a distribution of the Subordinated Debt Securities to the holders of
the Trust Preferred Securities in liquidation of the Trust or (ii) in connection with
certain mergers, consolidations or amalgamations permitted by the declaration of trust
or other governing instrument of such Trust; |
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to maintain the reservation for issuance of the number of shares of CMS Energy
Common Stock that would be required from time to time upon the conversion of all of the
CMS Energy Debt Securities then outstanding; |
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to use its reasonable efforts, consistent with the terms and provisions of the
declaration of trust or other governing instrument of such Trust, to cause the Trust to
remain classified as a business trust and not as an association taxable as a
corporation for United States federal income tax purposes; and |
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to deliver shares of CMS Energy Common Stock upon an election by the holders of
the Trust Preferred Securities to convert such Trust Preferred Securities into CMS
Energy Common Stock. |
As part of the Guarantees, CMS Energy will agree that it will honor all obligations described
therein relating to the conversion or exchange of the Trust Preferred Securities into or for CMS
Energy Common Stock, Senior Debt Securities or Subordinated Debt Securities.
Amendments and Assignment
Except with respect to any changes that do not materially adversely affect the rights of
holders of the Trust Preferred Securities (in which case no vote will be required), the Guarantees
may not be amended without the prior approval of the holders of a majority in aggregate liquidation
amount of such outstanding Trust Preferred Securities. All guarantees and agreements contained in
the Guarantees shall bind the successors, assigns, receivers, trustees and representatives of CMS
Energy and shall inure to the benefit of the holders of the Trust Preferred Securities then
outstanding.
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Termination of the Guarantees
The Guarantees will terminate and be of no further force and effect upon full payment of the
redemption price of the Trust Preferred Securities, upon full payment of the amounts payable upon
liquidation of the Trust, upon the distribution, if any, of CMS Energy Common Stock to the holders
of Trust Preferred Securities in respect of the conversion of all such holders Trust Preferred
Securities into CMS Energy Common Stock or upon distribution of the CMS Energy Debt Securities to
the holders of the Trust Preferred Securities in exchange for all of the Trust Preferred
Securities. The Guarantees will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Trust Preferred Securities must restore payment of any sums paid
under such Trust Preferred Securities or the Guarantees.
Events of Default
An event of default under a Guarantee will occur upon the failure of CMS Energy to perform any
of its payment or other obligations thereunder. The holders of a majority in aggregate liquidation
amount of the Trust Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to a Guarantee Trustee in respect of a Guarantee
or to direct the exercise of any trust or power conferred upon a Guarantee Trustee under the
Guarantees.
If a Guarantee Trustee fails to enforce a Guarantee, any holder of the Trust Preferred
Securities may institute a legal proceeding directly against CMS Energy to enforce its rights under
such Guarantee without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity. In addition, any record holder of Trust Preferred
Securities shall have the right, which is absolute and unconditional, to proceed directly against
CMS Energy to obtain Guarantee Payments, without first waiting to determine if the Guarantee
Trustee has enforced a Guarantee or instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity. CMS Energy has waived any right or remedy to require that
any action be brought just against the Trust or any other person or entity before proceeding
directly against CMS Energy.
CMS Energy, as guarantor, is required to file annually with each Guarantee Trustee a
certificate as to whether or not CMS Energy is in compliance with all the conditions and covenants
applicable to it under the Guarantees.
Status of the Guarantees
The Guarantees will constitute unsecured obligations of CMS Energy and will rank equal to or
subordinate and junior in right of payment to all other liabilities of CMS Energy, as applicable.
The Guarantees will rank pari passu with or senior to, as applicable, any guarantee now or
hereafter entered into by CMS Energy in respect of any preferred or preference stock of any
affiliate of CMS Energy.
The Guarantees will constitute a guarantee of payment and not of collection, which means that
the guaranteed party may institute a legal proceeding directly against the guarantor to enforce its
rights under the Guarantee without first instituting a legal proceeding against any other person or
entity. The Guarantees will be held for the benefit of the holders of the Trust Preferred
Securities. The Guarantees will not be discharged except by payment of the Guarantee Payments in
full to the extent not paid by the Trust or upon distribution of the CMS Energy Debt Securities to
the holders of the Trust Preferred Securities. The Guarantees do not place a limitation on the
amount of additional indebtedness that may be incurred by CMS Energy or any of its subsidiaries.
CONSUMERS
Introduction
Specific terms of Consumers debt securities (the Consumers Offered Securities or the
Consumers Debt Securities), consisting of senior notes or first mortgage bonds, or any
combination of these securities, for which this prospectus is being delivered, will be set forth in
an accompanying prospectus supplement or supplements. The prospectus supplement will set forth
with regard to the particular Consumers Offered Securities,
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without limitation, the designation, total principal amount, denomination, maturity, premium,
if any, any exchange, conversion, redemption or sinking fund provisions, any interest rate (which
may be fixed or variable), the time or method of calculating any interest payments, the right of
Consumers, if any, to defer payment or interest thereon and the maximum length of such deferral,
put options, if any, public offering price, ranking, any listing on a securities exchange and other
specific terms of the offering.
Consumers Debt Securities
Senior notes will be issued under a senior note indenture dated as of February 1, 1998, as
amended and supplemented, with The Bank of New York Mellon, as the senior note trustee (the Senior
Note Indenture). The first mortgage bonds will be issued under a mortgage indenture dated as of
September 1, 1945, as amended and supplemented, with The Bank of New York Mellon, as the mortgage
trustee (the Mortgage Indenture). The Senior Note Indenture and the Mortgage Indenture are
sometimes referred to in this prospectus individually as a Consumers Indenture and collectively
as the Consumers Indentures.
The following briefly summarizes the material provisions of the Consumers Indentures that have
been filed with the SEC and incorporated by reference in the registration statement of which this
prospectus is a part. This summary of the Consumers Indentures is not complete and is qualified in
its entirety by reference to the Consumers Indentures. You should read the more detailed
provisions of the applicable Consumers Indenture, including the defined terms, for provisions that
may be important to you. You should also read the particular terms of a series of Consumers Debt
Securities, which will be described in more detail in the applicable prospectus supplement.
Unless otherwise provided in the applicable prospectus supplement, the trustee under the
Senior Note Indenture and the Mortgage Indenture will be The Bank of New York Mellon.
General
The Consumers Indentures provide that Consumers Debt Securities may be issued in one or more
series, with different terms, in each case as authorized on one or more occasions by Consumers.
Federal income tax consequences and other special considerations applicable to any Consumers
Debt Securities issued at a discount will be described in the applicable prospectus supplement.
The applicable prospectus supplement relating to any series of Consumers Debt Securities will
describe the following terms, where applicable:
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the designation of such series of Consumers Debt Securities; |
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any limitations on the aggregate principal amount of any such series of
Consumers Debt Securities; |
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the original issue date for such series and the stated maturity date or dates
or such series; |
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the percentage of the principal amount at which the Consumers Debt Securities
will be sold and, if applicable, the method of determining the price; |
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the interest rate or rates, or the method of calculation of such rate or rates,
for such series of Consumers Debt Securities and the date from which such interest
shall accrue; |
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the terms, if any, regarding the optional or mandatory redemption of such
series, including redemption date or dates, if any, and the price or prices applicable
to such redemption; |
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the form of the Consumers Debt Securities of such series; |
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the maximum annual interest rate, if any, permitted for such series of
Consumers Debt Securities; |
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any other information required to complete the notes of such series; |
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the establishment of any office or agency pursuant to the terms of the
Consumers Indentures where the Consumers Debt Securities may be presented for payment;
and |
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any other specific terms of the Consumers Debt Securities. |
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Concerning the Trustees
The Bank of New York Mellon, the trustee under the Senior Note Indenture for the senior notes
and the trustee under the Mortgage Indenture for the first mortgage bonds, is one of a number of
banks with which Consumers and its subsidiaries maintain ordinary banking relationships, including
credit facilities.
Exchange and Transfer
Consumers Debt Securities may be presented for exchange and registered Consumers Debt
Securities may be presented for registration of transfer at the office or agency maintained for
that purpose subject to the restrictions set forth in the Consumers Debt Security and in the
applicable prospectus supplement without service charge, but upon payment of any taxes or other
governmental charges due in connection with the transfer, subject to any limitations contained in
the applicable Consumers Indenture. Consumers Debt Securities in bearer form and the coupons
appertaining thereto, if any, will be transferable by delivery as provided in the applicable
Consumers Indenture.
Payment
Payments of principal of and any interest on Consumers Debt Securities in registered form will
be made at the office or agency of the applicable trustee in the Borough of Manhattan, The City of
New York or its other designated office. However, at the option of Consumers, payment of any
interest may be made by check or by wire transfer. Payment of any interest due on Consumers Debt
Securities in registered form will be made to the persons in whose name the Consumers Debt
Securities are registered at the close of business on the record date for such interest payments.
Payments to be made in any other manner will be specified in the applicable prospectus supplement.
Governing Law
Each Consumers Indenture and the Consumers Debt Securities will be governed by, and construed
in accordance with, the laws of the State of Michigan unless the laws of another jurisdiction shall
mandatorily apply.
Senior Notes
General
The senior notes will be issued under the Senior Note Indenture. The following summary of the
terms of the senior notes does not purport to be complete and is qualified in its entirety by
express reference to the Senior Note Indenture, which is incorporated by reference herein. They
make use of defined terms and are qualified in their entirety by express reference to the cited
sections and articles of the Senior Note Indenture.
Security; Release Date
Until the Release Date (as described in the next paragraph), the senior notes will be secured
by one or more series of Consumers first mortgage bonds issued and delivered by Consumers to the
senior note trustee. See First Mortgage Bonds below. Upon the issuance of a series of senior
notes prior to the Release Date, Consumers will simultaneously issue and deliver to the senior note
trustee, as security for all senior notes, a series of first mortgage bonds that will have the same
stated maturity date and corresponding redemption provisions, and will be in the same total
principal amount as the series of the senior notes being issued. Any series of first mortgage
bonds securing senior notes may, but need not, bear interest. Any payment by Consumers to the
senior note trustee of principal of, and interest and/or premium, if any, on, a series of first
mortgage bonds will be applied by the senior note trustee to satisfy Consumers obligations with
respect to principal of, and interest and/or premium, if any, on, the corresponding senior notes.
The Release Date will be the date that all first mortgage bonds of Consumers issued and
outstanding under the Mortgage Indenture, other than first mortgage bonds securing senior notes,
have been retired (at, before or
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after their maturity) through payment, redemption or otherwise. On the Release Date, the
senior note trustee will deliver to Consumers, for cancellation, all first mortgage bonds securing
senior notes. Not later than 30 days thereafter, the senior note trustee will provide notice to
all holders of senior notes of the occurrence of the Release Date. As a result, on the Release
Date, the first mortgage bonds securing senior notes will cease to secure the senior notes. The
senior notes will then become unsecured general obligations of Consumers and will rank equally with
other unsecured indebtedness of Consumers. Each series of first mortgage bonds that secures senior
notes will be secured by a lien on certain property owned by Consumers. See First Mortgage
BondsPriority and Security below. Upon the payment or cancellation of any outstanding senior
notes, the senior note trustee will surrender to Consumers for cancellation an equal principal
amount of the related series of first mortgage bonds. Consumers will not permit, at any time prior
to the Release Date, the total principal amount of first mortgage bonds securing senior notes held
by the senior note trustee to be less than the total principal amount of senior notes outstanding.
Following the Release Date, Consumers will cause the Mortgage Indenture to be discharged and will
not issue any additional first mortgage bonds under the Mortgage Indenture. While Consumers will
be precluded after the Release Date from issuing additional first mortgage bonds, it will not be
precluded under the Senior Note Indenture or senior notes from issuing or assuming other secured
debt, or incurring liens on its property, except to the extent indicated under Certain Covenants
of ConsumersLimitation on Liens below.
Events of Default
The following constitute events of default under senior notes of any series:
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failure to pay principal of and premium, if any, on any senior note of such
series when due; |
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failure to pay interest on any senior note of such series when due for 60 days; |
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failure to perform any other covenant or agreement of Consumers in the senior
notes of such series for 90 days after written notice to Consumers by the senior note
trustee or the holders of at least 33% in total principal amount of the outstanding
senior notes; |
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prior to the Release Date, a default under the Mortgage Indenture has occurred
and is continuing; provided, however, that the waiver or cure of such default and the
rescission and annulment of the consequences under the Mortgage Indenture will be a
waiver of the corresponding event of default under the Senior Note Indenture and a
rescission and annulment of the consequences under the Senior Note Indenture; and |
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certain events of bankruptcy, insolvency, reorganization, assignment or
receivership of Consumers. |
If an event of default occurs and is continuing, either the senior note trustee or the holders
of a majority in total principal amount of the outstanding senior notes may declare the principal
amount of all senior notes to be due and payable immediately.
The senior note trustee generally will be under no obligation to exercise any of its rights or
powers under the Senior Note Indenture at the request or direction of any of the holders of senior
notes of such series unless those holders have offered to the senior note trustee reasonable
security or indemnity. Subject to the provisions for indemnity and certain other limitations
contained in the Senior Note Indenture, the holders of a majority in principal amount of the
outstanding senior notes of such series generally will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the senior note trustee or of
exercising any trust or power conferred on the senior note trustee. The holders of a majority in
principal amount of the outstanding senior notes of such series generally will have the right to
waive any past default or event of default (other than a payment default) on behalf of all holders
of senior notes of such series.
No holder of senior notes of a series may institute any action against Consumers under the
Senior Note Indenture unless:
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that holder gives to the senior note trustee advance written notice of default
and its continuance; |
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the holders of a majority in total principal amount of senior notes of such
series then outstanding affected by that event of default request the senior note
trustee to institute such action; |
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that holder has offered the senior note trustee reasonable indemnity; and |
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the senior note trustee shall not have instituted such action within 60 days of
such request. |
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Furthermore, no holder of senior notes will be entitled to institute any such action if and to
the extent that such action would disturb or prejudice the rights of other holders of senior notes
of such series.
Within 90 days after the occurrence of a default with respect to the senior notes of a series,
the senior note trustee must give the holders of the senior notes of such series notice of any such
default known to the senior note trustee, unless cured or waived. The senior note trustee may
withhold such notice if it determines in good faith that it is in the interest of such holders to
do so except in the case of default in the payment of principal of, and interest and/or premium, if
any, on, any senior notes of such series. Consumers is required to deliver to the senior note
trustee each year a certificate as to whether or not, to the knowledge of the officers signing such
certificate, Consumers is in compliance with the conditions and covenants under the Senior Note
Indenture.
Modification
Except as described below, Consumers and the senior note trustee cannot modify and amend the
Senior Note Indenture without the consent of the holders of a majority in principal amount of the
outstanding affected senior notes. Consumers and the senior note trustee cannot modify and amend
the Senior Note Indenture without the consent of the holder of each outstanding senior note of such
series to:
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change the maturity date of any senior note of such series; |
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reduce the rate (or change the method of calculation thereof) or extend the
time of payment of interest on any senior note of such series; |
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reduce the principal amount of, or premium payable on, any senior note of such
series; |
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change the coin or currency of any payment of principal of, and interest and/or
premium on, any senior note of such series; |
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change the date on which any senior note of such series may be redeemed or
repaid at the option of its holder or adversely affect the rights of a holder to
institute suit for the enforcement of any payment on or with respect to any senior note
of such series; |
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impair the interest of the senior note trustee in the first mortgage bonds
securing the senior notes of such series held by it or, prior to the Release Date,
reduce the principal amount of any series of first mortgage bonds securing the senior
notes of such series to an amount less than the principal amount of the related series
of senior notes or alter the payment provisions of such first mortgage bonds in a
manner adverse to the holders of the senior notes; or |
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modify the senior notes of such series necessary to modify or amend the Senior
Note Indenture or to waive any past default to less than a majority. |
Consumers and the senior note trustee can modify and amend the Senior Note Indenture without
the consent of the holders in certain cases, including:
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to add to the covenants of Consumers for the benefit of the holders or to
surrender a right conferred on Consumers in the Senior Note Indenture; |
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to add further security for the senior notes of such series; |
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to add provisions enabling Consumers to be released with respect to one or more
series of outstanding senior notes from its obligations under the covenants upon
satisfaction of conditions with respect to such series of senior notes; |
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to supply omissions, cure ambiguities or correct defects, which actions, in
each case, are not prejudicial to the interests of the holders in any material respect;
or |
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to make any other change that is not prejudicial to the holders of senior notes
of such series in any material respect. |
A supplemental indenture that changes or eliminates any covenant or other provision of the
Senior Note Indenture (or any supplemental indenture) that has expressly been included solely for
the benefit of one or more series of senior notes, or that modifies the rights of the holders of
senior notes of such series with respect to such covenant or provision, will be deemed not to
affect the rights under the Senior Note Indenture of the holders of senior notes of any other
series.
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Defeasance and Discharge
The Senior Note Indenture provides that Consumers will be discharged from any and all
obligations in respect to the senior notes of such series and the Senior Note Indenture (except for
certain obligations such as obligations to register the transfer or exchange of senior notes,
replace stolen, lost or mutilated senior notes and maintain paying agencies) if, among other
things, Consumers irrevocably deposits with the senior note trustee, in trust for the benefit of
holders of senior notes of such series, money or certain United States government obligations, or
any combination of money and government obligations. The payment of interest and principal on the
deposits in accordance with their terms must provide money in an amount sufficient, without
reinvestment, to make all payments of principal of, and any premium and interest on, the senior
notes on the dates such payments are due in accordance with the terms of the Senior Note Indenture
and the senior notes of such series. If all of the senior notes of such series are not due within
90 days of such deposit by redemption or otherwise, Consumers must also deliver to the senior note
trustee an opinion of counsel to the effect that the holders of the senior notes of such series
will not recognize income, gain or loss for federal income tax purposes as a result of that
defeasance or discharge of the Senior Note Indenture. Thereafter, the holders of senior notes must
look only to the deposit for payment of the principal of, and interest and any premium on, the
senior notes.
Consolidation, Merger and Sale or Disposition of Assets
Consumers may consolidate with or merge into another corporation, or sell or otherwise dispose
of its properties as or substantially as an entirety, if:
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the new corporation is a corporation organized and existing under the laws of
the United States of America, any state thereof or the District of Columbia; |
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the new corporation assumes the due and punctual payment of the principal of
and premium and interest on all the senior notes and the performance of every covenant
of the Senior Note Indenture to be performed or observed by Consumers; and |
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prior to the Release Date, the new corporation assumes Consumers obligations
under the Mortgage Indenture with respect to first mortgage bonds securing senior
notes. |
The conveyance or other transfer by Consumers of:
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all or any portion of its facilities for the generation of electric energy; |
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all of its facilities for the transmission of electric energy; or |
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all of its facilities for the distribution of natural gas; |
in each case considered alone or in any combination with properties described in such bullet
points, will not be considered a conveyance or other transfer of all the properties of Consumers as
or substantially as an entirety.
Certain Covenants of Consumers
Limitation on Liens
So long as any senior notes are outstanding, Consumers may not issue, assume, guarantee or
permit to exist after the Release Date any debt that is secured by any mortgage, security interest,
pledge or lien (each, a Lien) of or upon any operating property of Consumers, whether owned at
the date of the Senior Note Indenture or thereafter acquired, without in any such case effectively
securing the senior notes (together with, if Consumers shall so determine, any other indebtedness
of Consumers ranking equally with the senior notes) equally and ratably with such debt (but only so
long as such debt is so secured). The foregoing restriction will not apply to:
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Liens on any operating property existing at the time of its acquisition (which
Liens may also extend to subsequent repairs, alterations and improvements to such
operating property); |
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Liens on operating property of a corporation existing at the time such
corporation is merged into or consolidated with, or such corporation disposes of its
properties (or those of a division) as or substantially as an entirety to, Consumers; |
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Liens on operating property to secure the cost of acquisition, construction,
development or substantial repair, alteration or improvement of property or to secure
indebtedness incurred to provide funds for any such purpose or for reimbursement of
funds previously expended for any such purpose, provided such Liens are created or
assumed contemporaneously with, or within 18 months after, such acquisition or the
completion of substantial repair or alteration, construction, development or
substantial improvement; |
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Liens in favor of any state or any department, agency or instrumentality or
political subdivision of any state, or for the benefit of holders of securities issued
by any such entity (or providers of credit enhancement with respect to such
securities), to secure any debt (including, without limitation, obligations of
Consumers with respect to industrial development, pollution control or similar revenue
bonds) incurred for the purpose of financing all or any part of the purchase price or
the cost of substantially repairing or altering, constructing, developing or
substantially improving operating property of Consumers; or |
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any extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any Lien referred to in the first four bullet
points above; provided, however, that the principal amount of debt secured thereby and
not otherwise authorized by the first four bullet points above, inclusive, shall not
exceed the principal amount of debt, plus any premium or fee payable in connection with
any such extension, renewal or replacement, so secured at the time of such extension,
renewal or replacement. |
These restrictions will not apply to the issuance, assumption or guarantee by Consumers of
debt secured by a Lien that would otherwise be subject to the foregoing restrictions up to a total
amount that, together with all other secured debt of Consumers (not including secured debt
permitted under any of the foregoing exceptions) and the value of sale and lease-back transactions
existing at such time (other than sale and lease-back transactions the proceeds of which have been
applied to the retirement of certain indebtedness, sale and lease-back transactions in which the
property involved would have been permitted to be subjected to a Lien under any of the bullet
points above and sale and lease-back transactions that are permitted by the first sentence of
Limitation on Sale and Leaseback Transactions below), does not exceed the greater of 15% of net
tangible assets or 15% of capitalization.
Limitation on Sale and Leaseback Transactions
So long as senior notes are outstanding, Consumers may not enter into or permit to exist after
the Release Date any sale and lease-back transaction with respect to any operating property (except
for transactions involving leases for a term, including renewals, of not more than 48 months), if
the purchasers commitment is obtained more than 18 months after the later of the completion of the
acquisition, construction or development of such operating property or the placing in operation of
such operating property or of such operating property as constructed or developed or substantially
repaired, altered or improved. This restriction will not apply if:
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Consumers would be entitled under any of the provisions described in the bullet
points set forth under Limitation on Liens above to issue, assume, guarantee or
permit to exist debt secured by a Lien on such operating property without equally and
ratably securing the senior notes; |
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after giving effect to such sale and lease-back transaction, Consumers could
incur, pursuant to the provisions described in the second paragraph under Limitation
on Liens above, at least $1.00 of additional debt secured by Liens (other than Liens
permitted by the preceding bullet point); or |
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Consumers applies within 180 days an amount equal to, in the case of a sale or
transfer for cash, the net proceeds (not exceeding the net book value) thereof, and,
otherwise, an amount equal to the fair value (as determined by its board of directors)
of the operating property so leased to the retirement of senior notes or other debt of
Consumers ranking equally with, the senior notes, subject to reduction for senior notes
and such debt retired during such 180-day period otherwise than pursuant to mandatory
sinking fund or prepayment provisions and payments at stated maturity. |
Voting of Senior Note Mortgage Bonds Held by the Senior Note Trustee
The senior note trustee, as the holder of first mortgage bonds securing senior notes, will
attend any meeting of bondholders under the Mortgage Indenture, or, at its option, will deliver its
proxy in connection therewith as it
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relates to matters with respect to which it is entitled to vote or consent. So long as no
event of default under the Senior Note Indenture has occurred and is continuing, the senior note
trustee will vote or consent:
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in favor of amendments or modifications of the Mortgage Indenture of
substantially the same tenor and effect as follows: |
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to eliminate the maintenance and replacement fund and to
recover amounts of net property additions previously applied in satisfaction
thereof so that the same would become available as a basis for the issuance of
first mortgage bonds; |
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to eliminate sinking funds or improvement funds and to recover
amounts of net property additions previously applied in satisfaction thereof so
that the same would become available as a basis for the issuance of first
mortgage bonds; |
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to eliminate the restriction on the payment of dividends on
common stock and to eliminate the requirements in connection with the periodic
examination of the mortgaged and pledged property by an independent engineer; |
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to permit first mortgage bonds to be issued under the Mortgage
Indenture in a principal amount equal to 70% of unfunded net property additions
instead of 60%, to permit sinking funds or improvement funds requirements (to
the extent not otherwise eliminated) under the Mortgage Indenture to be
satisfied by the application of net property additions in an amount equal to
70% of such additions instead of 60%, and to permit the acquisition of property
subject to certain liens prior to the lien of the Mortgage Indenture if the
principal amount of indebtedness secured by such liens does not exceed 70% of
the cost of such property instead of 60%; |
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to eliminate requirements that Consumers deliver a net earnings
certificate for any purpose under the Mortgage Indenture; |
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to raise the minimum dollar amount of insurance proceeds on
account of loss or damage that must be payable to the senior note trustee from
$50,000 to an amount equal to the greater of (i) $5,000,000 and (ii) 3% of the
total principal amount of first mortgage bonds outstanding; |
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to increase the amount of the fair value of property that may
be sold or disposed of free from the lien of the Mortgage Indenture, without
any release or consent by the senior note trustee, from not more than $25,000
in any calendar year to not more than an amount equal to the greater of (i)
$5,000,000 and (ii) 3% of the total principal amount of first mortgage bonds
then outstanding; |
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to permit certain mortgaged and pledged property to be released
from the lien of the Mortgage Indenture if, in addition to certain other
conditions, the senior note trustee receives purchase money obligations of not
more than 70% of the fair value of such property instead of 60% and to
eliminate the further requirement for the release of such property that the
total principal amount of purchase money obligations held by the senior note
trustee not exceed 20% of the principal amount of first mortgage bonds
outstanding; and |
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to eliminate the restriction prohibiting the mortgage trustee
from applying cash held by it pursuant to the Mortgage Indenture to the
purchase of bonds not otherwise redeemable at a price exceeding 110% of the
principal of such bonds, plus accrued interest; and |
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with respect to any other amendments or modifications of the Mortgage
Indenture, as follows: the senior note trustee shall vote all first mortgage bonds
securing senior notes then held by it, or consent with respect thereto, proportionately
with the vote or consent of the holders of all other first mortgage bonds outstanding
under the Mortgage Indenture, the holders of which are eligible to vote or consent;
however, the senior note trustee will not vote in favor of, or consent to, any
amendment or modification of the Mortgage Indenture that, if it were an amendment or
modification of the Senior Note Indenture, would require the consent of holders of
senior notes (as described under Modification above) without the prior consent of
holders of senior notes that would be required for such an amendment or modification of
the Senior Note Indenture. |
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Concerning the Senior Note Trustee
The Bank of New York Mellon is both the senior note trustee under the Senior Note Indenture
and the mortgage trustee under the Mortgage Indenture. The Senior Note Indenture provides that
Consumers obligations to compensate the senior note trustee and reimburse the senior note trustee
for expenses, disbursements and advances will constitute indebtedness that will be secured by a
lien generally prior to that of the senior notes upon all property and funds held or collected by
the senior note trustee as such.
First Mortgage Bonds
General
The first mortgage bonds issued either alone or securing senior notes will be issued under the
Mortgage Indenture. The following summary of the terms of the first mortgage bonds does not
purport to be complete and is qualified in its entirety by all of the provisions of the Mortgage
Indenture, which is incorporated by reference herein. They make use of defined terms and are
qualified in their entirety by express reference to the cited sections and articles of the Mortgage
Indenture, a copy of which will be available upon request to the mortgage trustee (or, in the case
of first mortgage bonds being issued to secure senior notes, the request should be made to the
senior note trustee).
First mortgage bonds securing senior notes are to be issued under the Mortgage Indenture as
security for Consumers obligations under the Senior Note Indenture and will be immediately
delivered to and registered in the name of the senior note trustee. The first mortgage bonds
securing senior notes will be issued as security for senior notes of a series and will secure the
senior notes of that series until the Release Date. The Senior Note Indenture provides that the
senior note trustee shall not transfer any first mortgage bonds securing senior notes except to a
successor trustee, to Consumers (as provided in the Senior Note Indenture) or in compliance with a
court order in connection with a bankruptcy or reorganization proceeding of Consumers. The senior
note trustee shall generally vote the first mortgage bonds securing senior notes proportionately
with what it believes to be the vote of all other first mortgage bonds then outstanding except in
connection with certain amendments or modifications of the Mortgage Indenture, as described under
Senior NotesVoting of Senior Note Mortgage Bonds Held by the Senior Note Trustee above.
First mortgage bonds securing senior notes will correspond to the senior notes of the related
series in respect of principal amount, interest rate, maturity date and redemption provisions.
Upon payment of the principal or premium, if any, or interest on senior notes of a series, the
related first mortgage bonds in a principal amount equal to the principal amount of such senior
notes will, to the extent of such payment of principal, premium or interest, be deemed fully paid
and the obligation of Consumers to make such payment shall be discharged.
Priority and Security
The first mortgage bonds issued either alone or securing senior notes of any series will rank
equally as to security with bonds of other series now outstanding or issued later under the
Mortgage Indenture. This security is a direct first lien on substantially all of Consumers
property and franchises (other than certain property expressly excluded from the lien (such as
cash, bonds, stock and certain other securities, contracts, accounts and bills receivables,
judgments and other evidences of indebtedness, stock in trade, materials or supplies manufactured
or acquired for the purpose of sale and/or resale in the usual course of business or consumable in
the operation of any of the properties of Consumers, natural gas, oil and minerals, motor vehicles
and certain real property listed in Schedule A to the Mortgage Indenture)). This lien is subject
to excepted encumbrances (and certain other limitations) as defined and described in the Mortgage
Indenture. It is also subject to certain provisions of Michigan law that provide that, under
certain circumstances, the State of Michigans lien against property on which it has incurred costs
related to any response activity that is subordinate to prior recorded liens can become superior to
such prior liens pursuant to court order. The Mortgage Indenture permits, with certain
limitations, the acquisition of property subject to prior liens and, under certain conditions,
permits the issuance of additional indebtedness under such prior liens to the extent of 60% of net
property additions made by Consumers to the property subject to such prior liens.
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Release and Substitution of Property
The Mortgage Indenture provides that, subject to various limitations, property may be released
from the lien thereof when sold or exchanged, or contracted to be sold or exchanged, upon the basis
of:
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cash deposited with the mortgage trustee; |
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bonds or purchase money obligations delivered to the mortgage trustee; |
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prior lien bonds delivered to the mortgage trustee or reduced or assumed by the
purchaser; |
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property additions acquired in exchange for the property released; or |
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a showing that unfunded net property additions exist. |
The Mortgage Indenture also permits the withdrawal of cash upon a showing that unfunded net
property additions exist or against the deposit of bonds or the application thereof to the
retirement of bonds.
Modification of Mortgage Indenture
The Mortgage Indenture, the rights and obligations of Consumers and the rights of the first
mortgage bondholders may be modified through a supplemental indenture by Consumers with the consent
of the holders of 75% in principal amount of the first mortgage bonds and of not less than 60% of
the principal amount of each series affected. In general, however, no modification of the terms of
payment of principal or interest and no modification affecting the lien or reducing the percentage
required for modification is effective against any first mortgage bondholder without the first
mortgage bondholders consent. Consumers has reserved the right without any consent or other
action by the holders of bonds of any series created after September 15, 1993 or by the holder of
any senior note or exchange note to amend the Mortgage Indenture in order to substitute a majority
in principal amount of first mortgage bonds outstanding under the Mortgage Indenture for the 75%
requirement set forth above (and then only in respect of such series of outstanding first mortgage
bonds as shall be affected by the proposed action) and to eliminate the requirement for a
series-by-series consent requirement.
Concerning the Mortgage Trustee
The Bank of New York Mellon is both the mortgage trustee under the Mortgage Indenture and the
senior note trustee under the Senior Note Indenture. The Mortgage Indenture provides that
Consumers obligations to compensate the mortgage trustee and reimburse the mortgage trustee for
expenses, disbursements and advances will constitute indebtedness that will be secured by a lien
generally prior to that of the first mortgage bonds securing senior notes upon all property and
funds held or collected by the mortgage trustee as such.
The mortgage trustee or the holders of 20% in total principal amount of the first mortgage
bonds may declare the principal due on default, but the holders of a majority in total principal
amount may annul such declaration and waive the default if the default has been cured. Subject to
certain limitations, the holders of a majority in total principal amount may generally direct the
time, method and place of conducting any proceeding for the enforcement of the Mortgage Indenture.
No first mortgage bondholder has the right to institute any proceedings relating to the Mortgage
Indenture unless that holder shall have given the mortgage trustee written notice of a default, the
holders of 20% of outstanding first mortgage bonds shall have tendered to the mortgage trustee
reasonable security or indemnity against costs, expenses and liabilities and requested the mortgage
trustee in writing to take action, the mortgage trustee shall have declined to take action or
failed to do so within 60 days and no inconsistent directions shall have been given by the holders
of a majority in total principal amount of the first mortgage bonds.
Defaults
The Mortgage Indenture defines the following as defaults:
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failure to pay principal when due; |
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failure to pay interest for 60 days; |
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failure to pay any installment of any sinking or other purchase fund for 90
days; |
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certain events in bankruptcy, insolvency or reorganization; and |
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failure to perform any other covenant for 90 days following written demand by
the mortgage trustee for Consumers to cure such failure. |
Consumers has covenanted to pay interest on any overdue principal and (to the extent permitted
by law) on overdue installments of interest, if any, on the bonds under the Mortgage Indenture at
the rate of 6% per year. The Mortgage Indenture does not contain a provision requiring any
periodic evidence to be furnished as to the absence of default or as to compliance with the terms
thereof. However, Consumers is required by law to furnish annually to the trustee a certificate as
to compliance with all conditions and covenants under the Mortgage Indenture.
BOOK-ENTRY SYSTEM
Unless indicated otherwise in the applicable prospectus supplement, The Depository Trust
Company (DTC), New York, New York, will act as securities depository for the CMS Energy Offered
Securities, the Trust Preferred Securities and the Consumers Offered Securities (collectively, the
Offered Securities). The Offered Securities will be issued as fully-registered securities
registered in the name of Cede & Co. (DTCs partnership nominee) or such other name as may be
requested by an authorized representative of DTC. One fully-registered Offered Security
certificate will be issued for each issue of the Offered Securities, each in the aggregate
principal amount of such issue, and will be deposited with DTC. If, however, the aggregate
principal amount of any issue exceeds $500 million, one certificate will be issued with respect to
each $500 million of principal amount, and an additional certificate will be issued with respect to
any remaining principal amount of such issue.
DTC is a limited-purpose trust company organized under the New York Banking Law, a banking
organization within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a clearing corporation within the meaning of the New York Uniform Commercial Code and a
clearing agency registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds and provides asset servicing for securities that DTCs participants (Direct Participants)
deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of
sales and other securities transactions in deposited securities, through electronic computerized
book-entry transfers and pledges between Direct Participants accounts. This eliminates the need
for physical movement of securities certificates. Direct Participants include both U.S. and
non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing
Corporation (DTCC). DTCC is the holding company for DTC, National Securities Clearing
Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies.
DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also
available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust
companies and clearing corporations that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly (Indirect Participants).
Purchases of Offered Securities under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Offered Securities on DTCs records. The
ownership interest of each actual purchaser of each Offered Security (Beneficial Owner) is in
turn to be recorded on the Direct Participants and Indirect Participants records. Beneficial
Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are,
however, expected to receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct Participant or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the
Offered Securities are to be accomplished by entries made on the books of Direct Participants and
Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Offered Securities, except in the event that
use of the book-entry system for the Offered Securities is discontinued.
To facilitate subsequent transfers, all Offered Securities deposited by Direct Participants
with DTC are registered in the name of DTCs partnership nominee, Cede & Co., or such other name as
may be requested by an authorized representative of DTC. The deposit of Offered Securities with
DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any
change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the
Offered Securities; DTCs records reflect only the identity of the Direct Participants to whose
accounts such Offered Securities are credited, which may or may not be the Beneficial
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Owners. The Direct Participants and Indirect Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time. Beneficial Owners of Offered
Securities may wish to take certain steps to augment the transmission to them of notices of
significant events with respect to the Offered Securities, such as redemptions, tenders, defaults
and proposed amendments to the Offered Security documents. For example, Beneficial Owners of
Offered Securities may wish to ascertain that the nominee holding the Offered Securities for their
benefit has agreed to obtain and transmit notices to Beneficial Owners.
Redemption notices shall be sent to DTC. If less than all of the Offered Securities within an
issue are being redeemed, DTCs practice is to determine by lot the amount of the interest of each
Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
Offered Securities unless authorized by a Direct Participant in accordance with DTCs MMI
Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the applicable Registrant as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.s consenting or
voting rights to those Direct Participants to whose accounts Offered Securities are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions and dividend payments on the Offered Securities will be
made to Cede & Co., or such other nominee as may be requested by an authorized representative of
DTC. DTCs practice is to credit Direct Participants accounts upon DTCs receipt of funds and
corresponding detail information from the applicable Registrant or the agent, on payable date in
accordance with their respective holdings shown on DTCs records. Payments by participants to
Beneficial Owners will be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered in street name,
and will be the responsibility of such participant and not of DTC, the agent or the applicable
Registrant, subject to any statutory or regulatory requirements as may be in effect from time to
time. Payment of redemption proceeds, distributions and dividend payments to Cede & Co. (or such
other nominee as may be requested by an authorized representative of DTC) is the responsibility of
the applicable Registrant or the agent, disbursement of such payments to Direct Participants will
be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be
the responsibility of Direct Participants and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Offered Securities purchased or
tendered, through its participant, to the tender or remarketing agent, and shall effect delivery of
such Offered Securities by causing the Direct Participant to transfer the such participants
interest in the Offered Securities, on DTCs records, to such agent. The requirement for physical
delivery of Offered Securities in connection with an optional tender or a mandatory purchase will
be deemed satisfied when the ownership rights in the Offered Securities are transferred by Direct
Participants on DTCs records and followed by a book-entry credit of tendered Offered Securities to
such agents DTC account.
DTC may discontinue providing its services as depository with respect to the Offered
Securities at any time by giving reasonable notice to the applicable Registrant or the agent.
Under such circumstances, in the event that a successor depository is not obtained, Offered
Security certificates are required to be printed and delivered.
The applicable Registrant may decide to discontinue use of the system of book-entry-only
transfers through DTC (or a successor securities depository). In that event, Offered Security
certificates will be printed and delivered to DTC.
The information in this section concerning DTC and DTCs book-entry system has been obtained
from sources that each Registrant believes to be reliable, but no Registrant takes any
responsibility for the accuracy thereof.
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LEGAL OPINIONS
Opinions as to the legality of certain of the Offered Securities will be rendered for CMS
Energy by Shelley J. Ruckman, Esq., Assistant General Counsel for CMS Energy. Certain matters of
Delaware law relating to the validity of the Trust Preferred Securities will be passed upon on
behalf of the Trusts by Sidley Austin LLP, special Delaware counsel to the Trusts. Certain United
States federal income taxation matters may be passed upon for CMS Energy, the Trusts and Consumers
by either Theodore Vogel, tax counsel for CMS Energy, or by special tax counsel to CMS Energy, the
Trusts and Consumers, who will be named in the applicable prospectus supplement. Certain legal
matters with respect to Offered Securities will be passed upon by counsel for any underwriters,
dealers or agents, each of whom will be named in the related prospectus supplement.
EXPERTS
The consolidated financial statements and schedule of CMS Energy Corporation as of and for the
year ended December 31, 2007 and managements assessment of the effectiveness of internal control
over financial reporting as of December 31, 2007 (which is included in Managements Report on
Internal Control over Financial Reporting) incorporated in this prospectus by reference to CMS
Energy Corporations Annual Report on Form 10-K for the year ended December 31, 2007 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered
public accounting firm, given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements (including schedules appearing therein) for 2006 and
2005 of CMS Energy Corporation appearing in CMS Energy Corporations Annual Report (Form 10-K) for
the year ended December 31, 2007 included therein, have been audited by Ernst & Young LLP,
independent registered public accounting firm, as set forth in their report thereon, included
therein, and incorporated herein by reference, which is based in part on the report of
PricewaterhouseCoopers LLP, independent registered public accounting firm for the Midland
Cogeneration Venture Limited Partnership (the MCV Partnership). Such consolidated financial
statements have been incorporated herein by reference in reliance upon such reports given on the
authority of such firms as experts in accounting and auditing.
The consolidated financial statements and schedule of Consumers Energy Company as of and for
the year ended December 31, 2007 and managements assessment of the effectiveness of internal
control over financial reporting as of December 31, 2007 (which is included in Managements Report
on Internal Control over Financial Reporting) incorporated in this prospectus by reference to
Consumers Energy Companys Annual Report on Form 10-K for the year ended December 31, 2007 have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent
registered public accounting firm, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements (including schedule appearing therein) for 2006 and 2005
of Consumers Energy Company appearing in Consumers Energy Companys Annual Report (Form 10-K) for
the year ended December 31, 2007 included therein, have been audited by Ernst & Young LLP,
independent registered public accounting firm, as set forth in their report thereon, included
therein, and incorporated herein by reference, which is based in part on the report of
PricewaterhouseCoopers LLP, independent registered public accounting firm for the MCV Partnership.
Such consolidated financial statements have been incorporated herein by reference in reliance upon
such reports given on the authority of such firms as experts in accounting and auditing.
The financial statements of the MCV Partnership, as of November 21, 2006 and December 31, 2005
and for the period ended November 21, 2006 and the year ended December 31, 2005, not separately
presented in this prospectus, have been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, whose report thereon is incorporated in this prospectus by
reference to CMS Energy Corporations and Consumers Energy Companys combined Annual Report on Form
10-K for the year ended December 31, 2007. Such financial statements, to the extent they have been
included in the financial statements of CMS Energy Corporation and Consumers Energy Company, have
been so incorporated in reliance on the report of such independent registered public accounting
firm given on the authority of said firm as experts in auditing and accounting.
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$500,000,000
Consumers Energy Company
6.70% First Mortgage Bonds due 2019
PROSPECTUS SUPPLEMENT
Barclays Capital
J.P. Morgan
BNP PARIBAS
Scotia Capital
SunTrust Robinson Humphrey
Comerica Securities
RBS Greenwich Capital
KeyBanc Capital Markets
Wedbush Morgan Securities Inc.
Blaylock Robert Van, LLC
Fifth Third Securities
The Williams Capital Group, L.P.
March 2, 2009