0000950131-01-503970.txt : 20011112
0000950131-01-503970.hdr.sgml : 20011112
ACCESSION NUMBER: 0000950131-01-503970
CONFORMED SUBMISSION TYPE: 424B5
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20011105
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ANTHRACITE CAPITAL INC
CENTRAL INDEX KEY: 0001050112
STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798]
IRS NUMBER: 133978906
STATE OF INCORPORATION: MD
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 424B5
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69848
FILM NUMBER: 1774519
BUSINESS ADDRESS:
STREET 1: 345 PARK AVENUE
CITY: NEW YORK
STATE: NY
ZIP: 10154
BUSINESS PHONE: 2127545560
MAIL ADDRESS:
STREET 1: 345 PARK AVENUE
CITY: NEW YORK
STATE: NY
ZIP: 10154
FORMER COMPANY:
FORMER CONFORMED NAME: ANTHRACITE MORTGAGE CAPITAL INC
DATE OF NAME CHANGE: 19971121
424B5
1
d424b5.txt
FINAL PROSPECTUS
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-69848
PROSPECTUS SUPPLEMENT November 1, 2001
(To Prospectus Dated October 12, 2001)
-------------------------------------------------------------------------------
4,400,000 Shares
(LOGO)
Anthracite Capital, Inc.
Common Stock
-------------------------------------------------------------------------------
We are offering 4,400,000 shares of our common stock, par value $0.001 per
share. We will receive all of the net proceeds from the sale of such common
stock.
Our common stock is listed on the New York Stock Exchange under the symbol
"AHR." The last reported sale price of our common stock on that exchange on
November 1, 2001 was $9.56 per share.
Before buying any of these shares of our common stock, you should carefully
consider the risk factors described in "Risk factors" beginning on page 3 of
the accompanying prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus supplement or the accompanying
prospectus. Any representation to the contrary is a criminal offense.
Per share Total
----------------------------------------------------------------
Public offering price $9.56 $42,064,000
----------------------------------------------------------------
Underwriting discounts and commissions $0.55 $ 2,418,680
----------------------------------------------------------------
Proceeds, before expenses, to us $9.01 $39,645,320
----------------------------------------------------------------
We have granted the underwriters a 30-day option to purchase up to an
additional 660,000 shares of our common stock to cover over-allotments at the
public offering price per share, less the underwriting discounts and
commissions.
The underwriters are offering the shares of common stock as described in
"Underwriting." Delivery of the shares will be made on or about November 7,
2001.
UBS Warburg
FRIEDMAN BILLINGS RAMSEY
ABN AMRO Rothschild LLC
--------------------------------------------------------------------------------
You should rely only on the information contained in or incorporated by
reference into this prospectus supplement and the accompanying prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. The information in this
prospectus supplement and the accompanying prospectus is current as of the date
such information is presented. Our business, financial condition, results of
operations and prospects may have changed since such dates.
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Prospectus Supplement
Forward-looking information.. S-2
The Company.................. S-3
The offering................. S-7
Use of proceeds.............. S-7
Recent developments.......... S-7
Capitalization............... S-8
Selected financial data...... S-9
Underwriting................. S-10
Legal matters................ S-12
Experts...................... S-12
Prospectus
About this prospectus............... 1
Where you can find more
information....................... 1
Cautionary statement concerning
forward-looking statements........ 2
Anthracite Capital, Inc. and the
Manager........................... 2
Risk factors........................ 3
Use of proceeds..................... 8
Ratio of earnings to fixed charges.. 8
Ratio of combined fixed charges and
preferred stock dividends to
earnings.......................... 8
Description of securities........... 9
Description of capital stock........ 9
Description of debt securities...... 17
Federal income tax considerations... 22
Plan of distribution................ 35
Legal opinions...................... 36
Experts............................. 36
Forward-looking information
This prospectus supplement and the accompanying prospectus contain or
incorporate by reference certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements which are based on various
assumptions (some of which are beyond our control) may be identified by
reference to a future period or periods or by the use of forward-looking
terminology, such as "may," "will," "believe," "expect," "anticipate,"
"continue," or similar terms or variations on those terms or the negative of
those terms. Actual results could differ materially from those set forth in
forward-looking statements due to a variety of factors, including, but not
limited to, changes in interest rates, changes in the yield curve, changes in
prepayment rates, the availability of mortgage-backed securities for purchase,
the availability of financing and, if available, the terms of any financing.
For a discussion of the risks and uncertainties which could cause actual
results to differ from those contained in the forward-looking statements, see
"Risk factors" in the accompanying prospectus. We do not undertake, and
specifically disclaim any obligation, to publicly release the result of any
revisions which may be made to any forward-looking statements to reflect the
occurrence of anticipated or unanticipated events or circumstances after the
date of such statements.
--------------------------------------------------------------------------------
S-2
--------------------------------------------------------------------------------
The following information may not contain all of the information that is
important to you. We encourage you to read this prospectus supplement and the
accompanying prospectus, as well as the information which is incorporated by
reference in the accompanying prospectus, in their entireties. You should
carefully consider the factors set forth under "Risk factors" on page 3 in the
accompanying prospectus before making an investment decision to purchase shares
of our common stock. All references to "we," "us," the "Company" or
"Anthracite" in this prospectus supplement and the accompanying prospectus mean
Anthracite Capital, Inc., and for any period before January 1998 mean
Anthracite Mortgage Capital, Inc., the predecessor to Anthracite. Unless
otherwise indicated, the information in this prospectus supplement assumes that
the underwriters do not exercise the over-allotment option described in
"Underwriting."
The Company
BACKGROUND
We are Anthracite Capital, Inc., a Maryland corporation, formed in November
1997 to invest in multifamily, commercial and residential mortgage loans,
mortgage-backed securities and other real estate related assets in both U.S.
and non-U.S. markets. Our business focuses on (i) originating high yield
commercial real estate loans, which includes senior interests in partnerships
that own real property and are reported as real estate or joint venture
investments, (ii) investing in below investment grade commercial mortgage-
backed securities ("CMBS") where we have the right to control the
foreclosure/workout process on the underlying loans and collateral, and (iii)
acquiring investment grade mortgage-backed securities.
We have elected to be taxed as a real estate investment trust ("REIT") under
the Internal Revenue Code of 1986, as amended ("Code"), beginning with our 1998
taxable year, and we will generally not be subject to federal income tax to the
extent that we distribute our net income to our stockholders and qualify for
taxation as a REIT. Our address is 345 Park Avenue, 29th Floor, New York, New
York 10154 and our Internet address is www.anthracitecapital.com. The
information on our Internet site is not part of this prospectus supplement. Our
operations are managed by BlackRock Financial Management, Inc. which is
referred to in this prospectus supplement as "BlackRock." We have no ownership
interest in BlackRock.
BlackRock is a subsidiary of PNC Bank, National Association, which is itself a
wholly owned subsidiary of the PNC Financial Services Group, Inc. Established
in 1988, BlackRock is a registered investment adviser under the Investment
Advisers Act of 1940 and is one of the largest fixed-income investment
management firms in the United States. BlackRock engages in investment and risk
management as its sole businesses and specializes in the management of domestic
and offshore fixed-income assets for pension and profit sharing plans,
financial institutions such as banking and insurance companies and mutual funds
for retail and institutional investors. The address of BlackRock is 345 Park
Avenue, 29th Floor, New York, New York 10154 and BlackRock's Internet address
is www.blackrock.com. The information on Blackrock's Internet site is not part
of this prospectus supplement.
--------------------------------------------------------------------------------
S-3
The Company
--------------------------------------------------------------------------------
BUSINESS STRATEGY
Our business represents an integrated strategy where each line of business
supports the others and seeks to create additional value for shareholders over
and above operating each line in isolation. Our commercial real estate loans
provide high risk adjusted returns for shorter periods of time, our CMBS
portfolio provides diversification and high loss adjusted returns over a
weighted average life of approximately 10 years, and our investment grade
mortgage-backed securities are an actively managed portfolio that supports our
liquidity needs while earning attractive returns.
These strategies are pursued within an aggregate risk management framework that
seeks to limit the exposure of our equity and earnings to changes in interest
rates and other exogenous factors beyond our control.
ASSETS
Commercial Real Estate Loans
Commercial real estate loan originations represent our effort to take advantage
of opportunities in the real estate finance markets on a targeted basis. The
traditional first lien real estate lender has shifted its focus to originating
loans that can be securitized. To achieve the best execution for this strategy,
first lien lenders will generally reduce their loan to value ratios. Borrowers
continue to require the same leverage to achieve their required equity returns,
so alternative sources of capital are needed to fill the financing gap between
the first lien lender and the borrower's equity. Commercial real estate loan
originations, also known as mezzanine loans, fill this gap on a secured basis
at attractive prices and terms. We believe an effective mezzanine-lending
program can achieve superior risk adjusted returns versus alternative
investments.
The type of investments in this class include loans secured by second
mortgages, subordinated participations in first mortgages, loans secured by
partnership interests and preferred equity interests in real estate limited
partnerships. These investments have fixed or floating rate coupons and some
provide additional earnings through an IRR look back or profit participation.
As of June 30, 2001, we owned five separate mezzanine investments and two
preferred equity interests in partnerships that own office buildings. The
aggregate principal balance of these investments at June 30, 2001, was
approximately $109.2 million.
Commercial Mortgage-Backed Securities
We own below investment grade classes of six different CMBS and have been an
active bidder for this asset class. These CMBS investments are fixed rate
securities backed by pools of first mortgage loans on commercial real estate
assets located across the country. Owning commercial real estate loans in this
form allows us to earn attractive loss adjusted returns while achieving
significant diversification across geographic areas and property types. As of
June 30, 2001, the total par amount of these investments was approximately
$603.0 million, and the total fair market value was approximately $286.1
million, representing an average dollar price of $0.47.
--------------------------------------------------------------------------------
S-4
The Company
--------------------------------------------------------------------------------
Investment Grade Real Estate Related Securities
A key element in managing the risk of a portfolio of mezzanine loans and below
investment grade CMBS is to maintain sufficient liquid assets to support these
investments during periods of reduced liquidity in the financial markets. This
portfolio is generally comprised of government guaranteed residential fixed-
rate and adjustable rate mortgages, and CMBS rated at least "BBB" by Standard &
Poor's Corporation or the equivalent by another nationally recognized rating
agency (or, if not rated, determined by us to be comparable credit quality to
an investment which is rated "BBB" or better). The portfolio is typically
maintained at 50% of total assets or 20%-30% of equity (net of financing) and
provides a ready source of cash that can be used to support other investment
operations, if needed. This allows us to earn attractive returns on equity
while still maintaining significant liquidity. This portfolio is leveraged more
than the mezzanine and CMBS portfolios but significantly lower than a typical
investment grade portfolio.
At June 30, 2001, the Company's invested assets were allocated among these
three categories as follows:
Net Percent of
Invested invested invested Debt to
assets Liabilities capital capital capital ratio
----------------------------------------------------------------------------------
(dollars in thousands)
Commercial real estate
loans................ $ 109,185 $ 46,291 $ 62,894 17.4% 0.7x
Commercial mortgage-
backed securities.... 286,103 165,319 120,784 33.3 1.4
Cash and investment
grade real estate
related securities... 1,413,466 1,234,775 178,691 49.3 6.9
---------- ---------- -------- ----- ---
Total................. $1,808,754 $1,446,385 $362,369 100.0% 4.0x
========== ========== ======== ===== ===
BORROWINGS
We finance asset purchases through the net proceeds of common stock offerings,
the issuance of preferred securities, short-term borrowings under repurchase
agreements and lines of credit. As of June 30, 2001, we had approximately $1.4
billion in outstanding borrowings, including approximately $1.2 billion in
repurchase agreements.
MANAGEMENT
Our executive officers are:
. Laurence D. Fink, Chairman of the Board
. Hugh R. Frater, President and Chief Executive Officer
. Richard M. Shea, Chief Financial Officer and Chief Operating Officer
. Robert L. Friedberg, Secretary
Our executive management has substantial experience in originating, acquiring
and investing in real estate related loans and mortgage-backed securities. Mr.
Laurence Fink, with over 25 years of experience, founded BlackRock in 1988 and
currently serves as the Chairman and Chief Executive Officer of BlackRock. Mr.
Hugh Frater, Mr. Richard Shea and Mr. Robert Friedberg have an average of over
13 years of experience in the commercial real estate sector. In addition,
BlackRock has over 50 professionals from various commercial and residential
real estate disciplines including commercial real estate origination, servicing
and structuring, commercial asset backed sales, trading and structuring, as
well as residential mortgage-backed sales, trading and derivative hedging.
--------------------------------------------------------------------------------
S-5
The Company
--------------------------------------------------------------------------------
DISTRIBUTIONS
We have not established a minimum distribution payment level and our ability to
pay distributions may be adversely affected for the reasons described under the
caption "Risk factors" in the accompanying prospectus. All distributions will
be made at the discretion of our Board of Directors and will depend on our
earnings, our financial condition, maintenance of our REIT status and such
other factors as our Board of Directors may deem relevant from time to time.
To maintain our qualification as a REIT, we must distribute all or
substantially all of our taxable income to our stockholders for each year
(subject to certain adjustments). We have done this in the past and intend to
continue to do so in the future. This will enable us to qualify for the tax
benefits accorded to a REIT under the Code.
The following table sets forth the cash distributions declared per share for
our three most recent fiscal quarters and our last two fiscal years.
Cash distributions
declared per share
--------------------------------------------------------------------------------
2001
First Quarter ended March 31, 2001.......................... $0.30
Second Quarter ended June 30, 2001.......................... 0.32
Third Quarter ended September 30, 2001...................... 0.32
2000
First Quarter ended March 31, 2000.......................... $0.29
Second Quarter ended June 30, 2000.......................... 0.29
Third Quarter ended September 30, 2000...................... 0.29
Fourth Quarter ended December 31, 2000...................... 0.30
1999
First Quarter ended March 31, 1999.......................... $0.29
Second Quarter ended June 30, 1999.......................... 0.29
Third Quarter ended September 30, 1999...................... 0.29
Fourth Quarter ended December 31, 1999...................... 0.29
--------------------------------------------------------------------------------
S-6
--------------------------------------------------------------------------------
The offering
Common stock offered by us.............. 4,400,000 shares
Common stock to be outstanding after
this offering........................ 40,528,496 shares (1)
New York Stock Exchange symbol.......... AHR
Risk factors............................ Investing in our common stock
involves risks which are described
under "Risk factors" in the
accompanying prospectus.
--------
(1) Based upon the number of common shares outstanding as of November 1, 2001.
Use of proceeds
We intend to use the net proceeds of this offering to originate and acquire
commercial real estate related loans and residential mortgage-backed
securities. Based upon the public offering price per share of $9.56, set forth
on the cover page of this prospectus supplement, the net proceeds from the sale
of the 4,400,000 shares of common stock offered hereby will be approximately
$39,445,320, after deducting the underwriting discounts and commissions and the
estimated expenses of the offering.
Recent developments
On February 20, 2001, we issued 4,000,000 shares of our common stock in an
underwritten public offering. We also issued an additional 600,000 shares of
our common stock pursuant to the underwriter's over-allotment option which was
exercised on March 13, 2001. We raised approximately $38,200,000 in the
aggregate (after deducting underwriting fees and expenses) in this offering. We
used these proceeds to invest solely in residential mortgage-backed securities
that offered high risk-adjusted returns.
On May 11, 2001, we issued 4,000,000 shares of our common stock in an
underwritten public offering. We also issued an additional 600,000 shares of
our common stock pursuant to the underwriter's over-allotment option which was
exercised on June 5, 2001. We raised approximately $43,475,000 in the aggregate
(after deducting underwriting fees and expenses) in this offering. We used
these proceeds to invest solely in residential mortgage-backed securities that
offered high risk-adjusted returns.
On September 14, 2001, we declared our third quarter 2001 common stock dividend
of $0.32 per share for distribution to stockholders of record on September 30,
2001. This dividend is payable on October 31, 2001.
On October 29, 2001, we published a press release containing information
regarding our financial results as of and for the quarter and nine months ended
September 30, 2001. Net income available to common shareholders for the quarter
and nine months ended September 30, 2001 was $14,193,000 and $34,493,000,
respectively. Net income per share (diluted) for the quarter and nine months
ended September 30, 2001 was $0.38 and $1.04, respectively. Additional
information regarding our financial results as of and for the quarter and nine
months ended September 30, 2001 may be found in our October 29, 2001 press
release, a copy of which was filed with the Securities and Exchange Commission
by Form 8-K on October 29, 2001 and is incorporated by reference in the
accompanying prospectus.
--------------------------------------------------------------------------------
S-7
--------------------------------------------------------------------------------
Capitalization
The following table sets forth our capitalization as of June 30, 2001:
. on a historical basis; and
. as adjusted for the sale of 4,400,000 shares of our common stock at
the public offering price per share of $9.56 and the application of
the net proceeds of this offering as described under "Use of
proceeds."
The information set forth in the following table should be read in conjunction
with the more detailed information contained in the financial statements and
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 and our Quarterly Reports on Form 10-Q for
the quarters ended March 31, 2001 and June 30, 2001, which are incorporated by
reference into the accompanying prospectus.
As of June 30, 2001
----------------------------------------------------
As adjusted for
Actual this offering (1)
----------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data)
Stockholders' equity:
Common stock, par value $0.001 per share;
400,000,000 shares authorized; 35,124,273
shares issued and outstanding on a historical
basis; and 39,524,273 shares issued and
outstanding on an as adjusted basis following
this offering (2)............ $ 35 $ 39
10% Series B preferred stock, liquidation
preference $55,317........................... 42,086 42,086
Additional paid-in capital...................... 405,206 444,647
Distributions in excess of earnings............. (13,298) (13,298)
Accumulated other comprehensive loss............ (113,930) (113,930)
---------------------- ----------------------
Total stockholders' equity................. $320,099 $359,544
====================== ======================
--------
(1) After deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us. Assumes (i) no exercise of the
underwriters' over-allotment option to purchase up to an additional
660,000 shares of our common stock, (ii) a public offering price per share
of $9.56 and (iii) estimated expenses of $200,000.
(2) Excludes 1,004,223 shares of common stock issued after June 30, 2001,
pursuant to our Dividend Reinvestment and Stock Purchase Plan.
--------------------------------------------------------------------------------
S-8
--------------------------------------------------------------------------------
Selected financial data
The selected financial data set forth below is derived from our audited
financial statements for the period ended December 31, 1998 and the years ended
December 31, 1999 and 2000 and from our unaudited financial statements for the
six months ended June 30, 2000 and 2001. Our unaudited interim results, in the
opinion of management, reflect all adjustments (consisting solely of normal
recurring adjustments), which are necessary to present fairly the results for
the unaudited interim periods. Our unaudited interim results for the six months
ended June 30, 2001 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 2001. The following selected
financial data should be read in conjunction with the more detailed information
contained in the financial statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in our Annual Report on Form 10-K for the fiscal year ended December
31, 2000 and our Quarterly Reports on Form 10-Q for the quarters ended March
31, 2001 and June 30, 2001, which are incorporated by reference into the
accompanying prospectus.
For the period
March 24,
For the years through For the six months
ended December 31, December 31, ended June 30,
------------------- -------------- ----------------------
2000 1999 1998 (1) 2001 2000
----------------------------------------------------------------------------------
(dollars in thousands, except per share data)
Operating data:
Days in period......... 365 365 266 181 182
Total income........... $ 97,642 $ 57,511 $ 46,055 $ 54,745 $ 42,625
Expenses............... 60,839 33,280 29,004 30,023 26,988
Other gains (losses)... 2,523 2,442 (18,440) 2,056 1,022
SFAS 133 adjustment.... -- -- -- (1,903) --
Net income (loss)...... 39,326 26,673 (1,389) 24,875 16,659
Net income available to
common
shareholders........ 32,261 26,389 (1,389) 20,299 14,218
Per share data:
Net income (loss) (2):
Basic................. $1.37 $1.27 $(0.07) $0.75 $0.65
Diluted............... 1.28 1.26 (0.07) 0.71 0.61
Dividends declared per
common share........ 1.17 1.16 0.921 0.62 0.58
Balance sheet data:
Total assets........... $1,033,651 $679,662 $956,395 $1,828,961 $1,261,257
Total liabilities...... 760,993 481,379 774,666 1,478,229 990,517
Redeemable convertible
preferred stock..... 30,404 30,022 -- 30,633 30,188
Total stockholders'
equity.............. 242,254 168,261 181,729 320,099 240,552
Annualized financial
ratios:
Net interest margin
(net interest
income/average total
assets)............. 5.55% 6.02% 3.95% 5.19% 4.72%
Net interest spread
(yield on average
assets less average
cost of funds)...... 3.78% 2.59% 0.73% 3.41% 3.20%
--------
(1) We commenced operations on March 24, 1998.
(2) Net income per share for the six months ended June 30, 2001 excludes the
($0.06) per share SFAS 133 transition adjustment. See the March 31, 2001
quarterly report for additional information.
--------------------------------------------------------------------------------
S-9
--------------------------------------------------------------------------------
Underwriting
We and the underwriters for this offering named below have entered into an
underwriting agreement concerning the shares of our common stock being offered.
The underwriters' obligations are several and not joint, which means that each
underwriter is required to purchase a specified number of shares, but is not
responsible for the commitment of any other underwriter to purchase shares.
Subject to the terms and conditions of the underwriting agreement, each
underwriter has severally agreed to purchase the number of shares of common
stock set forth opposite its name below.
Underwriters Number of shares
--------------------------------------------------------------------------------
UBS Warburg LLC................................................ 2,042,500
Friedman, Billings, Ramsey & Co., Inc.......................... 1,225,500
ABN AMRO Rothschild LLC........................................ 817,000
A.G. Edwards & Sons, Inc. ..................................... 75,000
Legg Mason Wood Walker, Incorporated........................... 75,000
First Union Securities, Inc. .................................. 75,000
Flagstone Securities, LLC...................................... 30,000
J.J.B. Hilliard, W.L. Lyons, Inc. ............................. 30,000
Jolson Merchant Partners....................................... 30,000
---------
Total........................................................ 4,400,000
=========
The underwriting agreement provides that the obligations of the underwriters
are conditional and may be terminated at their discretion based on their
assessment of the state of the financial markets. The obligations of the
underwriters may also be terminated upon the occurrence of the events specified
in the underwriting agreement. The underwriters are severally committed to
purchase all of the common stock being offered if any shares are purchased,
other than those covered by the over-allotment option described below.
We have granted the underwriters an option to purchase up to 660,000 additional
shares of our common stock at the public offering price, less the underwriting
discounts and commissions, set forth on the cover page of this prospectus
supplement, to cover over-allotments, if any. This option is exercisable for a
period of 30 days. If the underwriters exercise their over-allotment option,
the underwriters have severally agreed, subject to conditions, to purchase
shares in approximately the same proportion as set forth in the table above.
The following table provides information regarding the per share and total
underwriting discounts and commissions that we will pay to the underwriters.
These amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase up to an additional 660,000 shares of our
common stock.
No exercise Full exercise
--------------------------------------------------------------------------------
Per share............................................. $ 0.55 $ 0.55
Total............................................... $2,418,680 $2,781,482
We estimate that the total expenses of the offering payable by us, excluding
underwriting discounts and commissions, will be approximately $200,000.
--------------------------------------------------------------------------------
S-10
Underwriting
--------------------------------------------------------------------------------
The underwriters propose to offer the common stock directly to the public
initially at the offering price set forth on the cover page of this prospectus
supplement. The underwriters may offer the common stock to securities dealers
at that price less a concession not in excess of $0.33 per share. Securities
dealers may reallow a concession not in excess of $0.10 per share on sales to
certain other brokers or dealers. The underwriters reserve the right to reject
any order for the purchase of shares. If all of the shares are not sold at the
public offering price, the underwriters may change the offering price and other
selling terms.
We have agreed in the underwriting agreement to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933 and to contribute to payments that the underwriters may
be required to make in respect thereof.
We, and each of our directors and executive officers, have agreed with the
underwriters that for a period of 90 days following the date of this prospectus
supplement that, without the prior written consent of UBS Warburg LLC, neither
we nor our directors and executive officers will offer, sell, contract to sell,
hedge or otherwise dispose of, directly or indirectly, any shares of our common
stock or any securities convertible into or exchangeable for shares of our
common stock.
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids in accordance
with Regulation M under the Securities Exchange Act of 1934. Over-allotment
transactions involve syndicate sales in excess of the offering size, which
create a syndicate short position. Stabilizing transactions permit bids to
purchase the common stock so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
common stock in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the underwriters
to reclaim a selling concession from a syndicate member when the common stock
originally sold by such syndicate member is purchased in a stabilizing
transaction or syndicate covering transaction to cover syndicate short
positions. These stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. Neither we nor the
underwriters make any representation or prediction as to the effect that the
transactions described above may have on the price of our common stock. These
transactions may be effected on the New York Stock Exchange or otherwise and,
if commenced, may be discontinued at any time.
In the ordinary course of their business, the underwriters and/or their
affiliates have in the past performed, and may continue to perform, investment
banking, broker dealer, lending, financial advisory or other services for us
for which they have received, or may receive, customary compensation.
--------------------------------------------------------------------------------
S-11
--------------------------------------------------------------------------------
Legal matters
Certain legal matters relating to Maryland law relating to the validity of the
common stock being offered by this prospectus supplement is being passed upon
for us by Miles & Stockbridge, P.C., Baltimore, Maryland. Certain legal matters
including legal matters described under "Federal Income Tax Considerations" in
the accompanying prospectus will be passed upon for us by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York. The validity of the common stock
offered by this prospectus supplement will be passed upon for the underwriters
by Sullivan & Cromwell, New York, New York. With respect to all matters of
Maryland law, Sullivan & Cromwell will rely upon Miles & Stockbridge, P.C.
Experts
Our financial statements included in this prospectus supplement by reference
from our Annual Report on Form 10-K for the year ended December 31, 2000 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
--------------------------------------------------------------------------------
S-12
PROSPECTUS
$414,900,000
ANTHRACITE CAPITAL, INC.
COMMON STOCK, PREFERRED STOCK, DEBT SECURITIES AND WARRANTS
----------------
Anthracite Capital, Inc. may sell to the public:
- common stock
- preferred stock
- debt securities
- warrants to purchase common stock
- warrants to purchase preferred stock
References in this prospectus to "Anthracite," "we," "us," or "our" refer
to Anthracite Capital, Inc. Prior to January 1998, our name was Anthracite
Mortgage Capital, Inc.
We urge you to read this prospectus and the accompanying prospectus
supplement, which will describe the specific terms of the common stock, the
preferred stock, the debt securities and the warrants, carefully before you
make your investment decision.
AN INVESTMENT IN THE SECURITIES BEING OFFERED INVOLVES SIGNIFICANT RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus or the accompanying prospectus supplement is truthful or
complete. Any representation to the contrary is a criminal offense.
----------------
THIS PROSPECTUS MAY NOT BE USED TO SELL SECURITIES UNLESS ACCOMPANIED BY
A PROSPECTUS SUPPLEMENT.
The date of this prospectus is October 12, 2001
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission using a "shelf" registration process.
Under this shelf process, we may sell any combination of the securities
described in this prospectus in one of more offerings up to a total dollar
amount of proceeds of $414,900,000. 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 that will contain specific information
about the terms of that offering. The prospectus supplement may also add,
update or change information contained in this prospectus. You should read both
this prospectus and any prospectus supplement together with additional
information described under the heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements, and other information with the SEC.
Such reports, proxy statements, and other information concerning us can be read
and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Room. The SEC maintains an Internet site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the SEC,
including ours. Our common stock is listed and traded on the New York Stock
Exchange. These reports, proxy statements and other information are also
available for inspection at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.
This prospectus is part of a registration statement filed with the SEC by
us. The full registration statement can be obtained from the SEC as indicated
above, or from us.
The SEC allows us to "incorporate by reference" the information we file
with the SEC. This permits us to disclose important information to you by
referencing these filed documents. Any information referenced this way is
considered part of this prospectus, and any information filed with the SEC
subsequent to this prospectus will automatically be deemed to update and
supersede this information. We incorporate by reference the following documents
which we have filed with the SEC (File No. 1-13937) under the Securities
Exchange Act of 1934 (the "Exchange Act"), and these documents are incorporated
herein by reference:
- Our Annual Report on Form 10-K for the fiscal year ended
December 31, 2000;
- Our Definitive Proxy Statement filed April 20, 2001;
- Our Quarterly Report on Form 10-Q for the quarter ended June
30, 2001;
- Our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2001;
- Our Current Reports on Form 8-K dated February 14, 2001,
February 28, 2001, and June 8, 2001; and
- The description of the common stock contained in our
registration statement on Form 8-A, filed on March 9, 1998,
under the Exchange Act, including any amendment or report
filed to update the description.
We incorporate by reference the documents listed above and any future
filings made with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act from the date of this prospectus until we file a post-effective
amendment which indicates the termination of the offering of the securities
made by this prospectus.
Any statement contained in a document incorporated or considered to be
incorporated by reference in this prospectus shall be considered to be modified
or superseded for purposes of this prospectus to the extent that a statement
1
contained in this prospectus or in any subsequently filed document that is or is
considered to be incorporated by reference modifies or supersedes the statement.
Any statement that is so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this prospectus.
We will provide without charge upon written or oral request, a copy of
any or all of the documents which are incorporated by reference to this
prospectus. You may direct your requests to Investor Relations, Anthracite
Capital, Inc., 345 Park Avenue, 29th Floor, New York, New York 10154 (telephone
number (212) 409-3333).
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Some statements contained or incorporated by reference in this
registration statement constitute forward-looking statements as such term is
defined in Section 27A of the Securities Act and Section 21E of the Exchange
Act. Some factors could cause actual results to differ materially from those in
the forward-looking statements. Factors that might cause such a material
difference include, but are not limited to:
(a)changes in the general economic climate,
(b)termination of the management agreement,
(c)interest rate fluctuations,
(d)our failure to qualify as a REIT and
(e)general competitive factors.
ANTHRACITE CAPITAL, INC. AND THE MANAGER
Anthracite Capital, Inc., a Maryland corporation, was formed in November
1997 to invest in multifamily, commercial and residential mortgage loans,
mortgage-backed securities and other real estate related assets in both U.S.
and non-U.S. markets. Our business focuses on (i) originating high yield
commercial real estate loans, which includes senior interests in partnerships
that own real property and are reported as real estate or joint venture
investments, (ii) investing in below investment grade commercial mortgage
backed securities where the Company has the right to control the
foreclosure/workout process on the underlying loans, and (iii) acquiring
investment grade real estate related securities. We have elected to be taxed as
a real estate investment trust ("REIT") under the Internal Revenue Code of
1986, as amended (the "Code") beginning with our 1998 taxable year, and we will
generally not be subject to federal income tax to the extent that we distribute
our net income to our stockholders and qualify for taxation as a REIT. Our
address is 345 Park Avenue, 29th Floor, New York, New York 10154 and our
Internet address is www.anthracitecapital.com. The information on our Internet
site is not part of this prospectus. Our operations are managed by BlackRock
Financial Management, Inc. which is referred to in this prospectus as
"BlackRock." We have no ownership interest in BlackRock.
BlackRock is a subsidiary of PNC Bank, National Association, which is
itself a wholly owned subsidiary of the PNC Financial Services Group, Inc.
Established in 1988, BlackRock is a registered investment adviser under the
Investment Advisers Act of 1940 and is one of the largest fixed-income
investment management firms in the United States. BlackRock engages in
investment and risk management as its sole businesses and specializes in the
management of domestic and offshore fixed-income assets for pension and profit
sharing plans, financial institutions such as banking and insurance companies
and mutual funds for retail and institutional investors. The address of
BlackRock is 345 Park Avenue, 29th Floor, New York, New York 10154 and
BlackRock's Internet address is www.blackrock.com. The information on
BlackRock's Internet site is not part of this prospectus.
2
RISK FACTORS
Conflicts of interest of BlackRock may result in decisions that do not fully
reflect stockholders' best interests.
Anthracite and BlackRock have common officers and directors, which may
present conflicts of interest in Anthracite's dealings with BlackRock and its
affiliates, including Anthracite's purchase of assets originated by such
affiliates. For example, Anthracite may purchase certain mortgage assets from
PNC Bank, which owns 70% of the outstanding capital stock of BlackRock. PNC
Bank will be able to influence the investment decisions of Anthracite.
BlackRock and its employees may engage in other business activities which
could reduce the time and effort spent on the management of Anthracite.
BlackRock also provides services to REITs not affiliated with us. As a result,
there may be a conflict of interest between the operations of BlackRock and its
affiliates in the acquisition and disposition of mortgage assets. In addition,
BlackRock and its affiliates may from time to time purchase mortgage assets for
their own account and may purchase or sell assets from or to Anthracite. Such
conflicts may result in decisions and allocations of mortgage assets by
BlackRock that are not in our best interests.
Although we have adopted investment guidelines, those guidelines give
BlackRock significant discretion in investing. Anthracite's investment and
operating policies and the strategies that BlackRock uses to implement those
policies may be changed at any time without the consent of stockholders.
We are dependent on BlackRock and the termination by us of our management
agreement with BlackRock could result in a termination fee.
The management agreement between Anthracite and BlackRock provides for
base management fees payable to BlackRock without consideration of the
performance of Anthracite's portfolio and also provides for incentive fees
based on certain performance criteria, which could result in BlackRock
recommending riskier or more speculative investments. Termination of the
management agreement between Anthracite and BlackRock by Anthracite would
result in the payment of a substantial termination fee, which could adversely
affect Anthracite's financial condition. Termination of the management
agreement by Anthracite could also adversely affect Anthracite if Anthracite
were unable to find a suitable replacement.
Interest rate fluctuations will affect the value of our mortgage assets, net
income and common stock.
Interest rates are highly sensitive to many factors, including
governmental monetary and tax policies, domestic and international economic and
political considerations and other factors beyond our control. Interest rate
fluctuations can adversely affect the income and value of our common stock in
many ways and present a variety of risks, including the risk of a mismatch
between asset yields and borrowing rates, variances in the yield curve and
changing prepayment rates.
An interest rate mismatch could occur between asset yields and borrowing rates
resulting in decreased yield.
Our operating results depend in large part on differences between the
income from our assets (net of credit losses) and our borrowing costs. We fund
a substantial portion of our assets with borrowings which have interest rates
that reset relatively rapidly, such as monthly or quarterly. We anticipate
that, in most cases, the income from our assets will respond more slowly to
interest rate fluctuations than the cost of borrowings, creating a potential
mismatch between asset yields and borrowing rates. Consequently, changes in
interest rates, particularly short-term interest rates, may significantly
influence our net income. Increases in these rates tend to decrease our net
income and market value of our net assets. Interest rate fluctuations that
result in our interest expense exceeding interest income would result in
Anthracite incurring operating losses.
3
Interest rate caps on our mortgage-backed securities may adversely affect our
profitability.
Our adjustable-rate mortgage-backed securities are typically subject to
periodic and lifetime interest rate caps. Periodic interest rate caps limit the
amount an interest rate can increase during any given period. Lifetime interest
rate caps limit the amount an interest rate can increase through maturity of a
mortgage-backed security. Our borrowings are not subject to similar
restrictions. Accordingly, in a period of rapidly increasing interest rates, we
could experience a decrease in net income or a net loss because the interest
rates on our borrowings could increase without limitation while the interest
rates on our adjustable-rate mortgage-backed securities would be limited by
caps.
Because we acquire fixed-rate securities, an increase in interest rates may
adversely affect our profitability.
We also invest in fixed-rate mortgage-backed securities. In a period of
rising interest rates, our interest payments could increase while the interest
we earn on our fixed-rate mortgage-backed securities would not change. This
would adversely affect our profitability.
A disproportionate rise in short term interest rates as compared to long term
interest rates may adversely affect our income.
The relationship between short-term and long-term interest rates is often
referred to as the "yield curve." Ordinarily, short-term interest rates are
lower than long-term interest rates. If short-term interest rates rise
disproportionately relative to long-term interest rates (a flattening of the
yield curve), our borrowing costs may increase more rapidly than the interest
income earned on our assets. Because our borrowings will primarily bear
interest at short-term rates and our assets will primarily bear interest at
medium-term to long-term rates, a flattening of the yield curve tends to
decrease our net income and market value of our net assets. Additionally, to
the extent cash flows from long-term assets that return scheduled and
unscheduled principal are reinvested, the spread between the yields of the new
assets and available borrowing rates may decline and also may tend to decrease
the net income and market value of our net assets. It is also possible that
short-term interest rates may adjust relative to long-term interest rates such
that the level of short-term rates exceeds the level of long-term rates (a
yield curve inversion). In this case, borrowing costs may exceed the interest
income and operating losses could be incurred.
Our assets include subordinated commercial mortgage-backed securities which are
subordinate in right of payment to more senior securities.
Our assets include a significant amount of subordinated commercial
mortgage-backed securities, which are the most subordinate class of securities
in a structure of securities secured by a pool of loans and accordingly are the
first to bear the loss upon a restructuring or liquidation of the underlying
collateral and the last to receive payment of interest and principal. We may
not recover the full amount or, in extreme cases, any of our initial investment
in such subordinated interests. Additionally, market values of these
subordinated interests tend to be more sensitive to changes in economic
conditions than more senior interests. As a result, such subordinated interests
generally are not actively traded and may not provide holders thereof with
liquidity of investment.
Our assets include mezzanine loans which have greater risks of loss than more
senior loans.
Our assets include a significant amount of mezzanine loans which involve
a higher degree of risk than long-term senior mortgage loans. In particular, a
foreclosure by the holder of the senior loan could result in the mezzanine loan
becoming unsecured. Accordingly, we may not recover some or all of our
investment in such a mezzanine loan. Additionally, the Company may permit
higher loan to value ratios on mezzanine loans than it would on conventional
mortgage loans when it is entitled to share in the appreciation in value of the
property securing the loan.
4
Prepayment rates can increase which would adversely affect yields on our
investments.
The yield on investments in mortgage loans and mortgage-backed securities
and thus the value of our common stock is sensitive to changes in prevailing
interest rates and changes in prepayment rates, which results in a divergence
between Anthracite's borrowing rates and asset yields, consequently reducing
income derived from our investments.
Our ownership of non-investment grade mortgage assets subjects us to an
increased risk of loss.
We acquire mortgage loans and non-investment grade mortgage-backed
securities, which are subject to greater risk of credit loss on principal and
non-payment of interest in contrast to investments in senior investment grade
securities.
Our mortgage loans are subject to certain risks.
We acquire, accumulate and securitize mortgage loans as part of our
investment strategy. While holding mortgage loans, we are subject to risks of
borrower defaults, bankruptcies, fraud and special hazard losses that are not
covered by standard hazard insurance. Also, the costs of financing and hedging
the mortgage loans can exceed the interest income on the mortgage loans. In the
event of any default under mortgage loans held by us, we will bear the risk of
loss of principal to the extent of any deficiency between the value of the
mortgage collateral and the principal amount of the mortgage loan. In addition,
delinquency and loss ratios on Anthracite's mortgage loans are affected by the
performance of third-party servicers and special servicers.
We invest in multifamily and commercial loans which involve a greater risk of
loss than single family loans.
Our investments include multifamily and commercial real estate loans
which are considered to involve a higher degree of risk than single family
residential lending because of a variety of factors, including generally larger
loan balances, dependency for repayment on successful operation of the
mortgaged property and tenant businesses operating therein, and loan terms that
include amortization schedules longer than the stated maturity which provide
for balloon payments at stated maturity rather than periodic principal
payments. In addition, the value of multifamily and commercial real estate can
be affected significantly by the supply and demand in the market for that type
of property.
Limited recourse loans limit our recovery to the value of the mortgaged
property.
A substantial portion of the mortgage loans we acquire may contain
limitations on the mortgagee's recourse against the borrower. In other cases,
the mortgagee's recourse against the borrower is limited by applicable
provisions of the laws of the jurisdictions in which the mortgaged properties
are located or by the mortgagee's selection of remedies and the impact of those
laws on that selection. In those cases, in the event of a borrower default,
recourse may be limited to only the specific mortgaged property and other
assets, if any, pledged to secure the relevant mortgage loan. As to those
mortgage loans that provide for recourse against the borrower and their assets
generally, there can be no assurance that such recourse will provide a recovery
in respect of a defaulted mortgage loan greater than the liquidation value of
the mortgaged property securing that mortgage loan.
The volatility of certain mortgaged property values may adversely affect our
mortgage loans.
Commercial and multifamily property values and net operating income
derived therefrom are subject to volatility and may be affected adversely by a
number of factors, including, but not limited to, national, regional and local
economic conditions (which may be adversely affected by plant closings,
industry slowdowns and other factors); local real estate conditions (such as an
oversupply of housing, retail, industrial, office or other commercial space);
changes or continued weakness in specific industry segments; perceptions by
5
prospective tenants, retailers and shoppers of the safety, convenience, services
and attractiveness of the property; the willingness and ability of the
property's owner to provide capable management and adequate maintenance;
construction quality, age and design; demographic factors; retroactive changes
to building or similar codes; and increases in operating expenses (such as
energy costs).
We invest in foreign mortgage loans and real properties which are subject to
currency conversion risks, foreign tax laws and uncertainty of foreign laws.
We invest in mortgage loans secured by real property located outside the
United States, which exposes us to currency conversion risks, foreign tax laws
and the uncertainty of foreign laws.
Leveraging our investments may increase our exposure to loss.
Our charter does not expressly limit borrowings. We leverage our
investments and thereby increase the volatility of our income and net asset
value which may result in operating or capital losses. If borrowing costs
increase, or if the cash flow generated by our assets decreases, our use of
leverage will increase the likelihood that we will experience reduced or
negative cash flow and reduced liquidity.
Our hedging transactions can limit our gains and increase our exposure to
losses.
We use hedging strategies that involve risk and that may not be
successful in insulating us from exposure to changing interest and prepayment
rates. There can be no assurance that a liquid secondary market will exist for
hedging instruments purchased or sold, and we may be required to maintain a
position until exercise or expiration, which could result in losses.
Failure to maintain REIT status would have adverse tax consequences.
To continue to qualify as a REIT, we must comply with requirements
regarding the nature of our assets and our sources of income. If we are
compelled to liquidate our mortgage-backed securities, we may be unable to
comply with these requirements, ultimately jeopardizing our status as a REIT.
For further discussion of these asset and source of income requirements, and
the consequences of our failure to continue to qualify as a REIT, please see
the "Federal Income Tax Considerations" section of this prospectus.
Potential future offerings could dilute the interests of holders of our common
stock.
Stockholders will be subject to significant potential dilution from
future equity offerings, including offerings of preferred stock and conversions
of preferred stock or exercises of options or warrants which may have an
adverse effect on the market price of our common stock.
Competition may adversely affect our ability to acquire assets.
Because of competition, we may not be able to acquire mortgage-backed
securities at favorable yields.
Failure to maintain an exemption from the investment company act would restrict
our operating flexibility.
We conduct our business so as not to become regulated as an investment
company under the Investment Company Act of 1940 (the "1940 Act"). Accordingly,
we do not expect to be subject to the restrictive provisions of the 1940 Act.
Failure to maintain an exemption from the 1940 Act would adversely affect our
ability to operate.
6
Restrictions on ownership of our common stock may inhibit market activity.
In order for Anthracite to meet the requirements for qualification as a
REIT at all times, our charter prohibits any person from acquiring or holding,
directly or indirectly, shares of capital stock in excess of 9.8% (in value or
in number of shares, whichever is more restrictive) of the aggregate of the
outstanding shares of any class of our capital stock. Our charter further
prohibits (i) any person from beneficially or constructively owning shares of
capital stock that would result in Anthracite being "closely held" under
Section 856(h) of the Code or would otherwise cause Anthracite to fail to
qualify as a REIT, and (ii) any person from transferring shares of capital
stock if such transfer would result in shares of capital stock being
beneficially owned by fewer than 100 persons. If any transfer of shares of
capital stock occurs which, if effective, would result in a violation of one or
more ownership limitations, then that number of shares of capital stock, the
beneficial or constructive ownership of which otherwise would cause such person
to violate such limitations (rounded to the nearest whole shares) shall be
automatically transferred to a trustee of a trust for the exclusive benefit of
one or more charitable beneficiaries, and the intended transferee may not
acquire any rights in such shares; provided, however, that if any transfer
occurs which, if effective, would result in shares of capital stock being owned
by fewer than 100 persons, then the transfer shall be null and void and the
intended transferee shall acquire no rights to the stock. Subject to certain
limitations, our Board of Directors may waive the limitations for certain
investors.
The authorized capital stock of Anthracite includes preferred stock
issuable in one or more series. The issuance of preferred stock could have the
effect of making an attempt to gain control of Anthracite more difficult by
means of a merger, tender offer, proxy contest or otherwise. The currently
outstanding preferred stock has a preference on dividend payments that could
affect our ability to make dividend distributions to the common stockholders.
The provisions of our charter or relevant Maryland law may inhibit market
activity and the resulting opportunity for the holders of our common stock to
receive a premium for their common stock that might otherwise exist in the
absence of such provisions. Such provisions also may make Anthracite an
unsuitable investment vehicle for any person seeking to obtain ownership of
more than 9.8% of the outstanding shares of our common stock.
Material provisions of the Maryland General Corporation Law ("MGCL")
relating to "business combinations" and a "control share acquisition" and of
the charter and bylaws of Anthracite may also have the effect of delaying,
deterring or preventing a takeover attempt or other change in control of
Anthracite that would be beneficial to stockholders and might otherwise result
in a premium over then prevailing market prices. Although the bylaws of
Anthracite contain a provision exempting the acquisition of our common stock by
any person from the control share acquisition statute, there can be no
assurance that such provision will not be amended or eliminated at any time in
the future.
We may become subject to environmental liabilities.
We may become subject to environmental risks when we acquire interests in
properties with material environmental problems. Such environmental risks
include the risk that operating costs and values of these assets may be
adversely affected by the obligation to pay for the cost of complying with
existing environmental laws, ordinances and regulations, as well as the cost of
complying with future legislation. Such laws often impose liability regardless
of whether the owner or operator knows of, or was responsible for, the presence
of such hazardous or toxic substances. The costs of investigation, remediation
or removal of hazardous substances could exceed the value of the property. Our
income and ability to make distributions to our stockholders could be affected
adversely by the existence of an environmental liability with respect to our
properties.
7
There is a limitation on the liability of BlackRock.
Pursuant to the management agreement, BlackRock will not assume any
responsibility other than to render the services called for thereunder and will
not be responsible for any action of the Board of Directors in following or
declining to follow its advice or recommendations. BlackRock and its directors
and officers will not be liable to Anthracite, any of our subsidiaries, the
unaffiliated directors, our stockholders or any subsidiary's stockholders for
acts performed in accordance with and pursuant to the management agreement,
except by reason of acts constituting bad faith, willful misconduct, gross
negligence or reckless disregard of their duties under the management
agreement. We have agreed to indemnify BlackRock and its directors and officers
with respect to all expenses, losses, damages, liabilities, demands, charges
and claims arising from acts of BlackRock not constituting bad faith, willful
misconduct, gross negligence or reckless disregard of duties, performed in good
faith in accordance with and pursuant to the management agreement.
Our investments may be illiquid and their value may decrease.
Many of our assets are relatively illiquid. In addition, certain of the
mortgage-backed securities that we have acquired or we will acquire will
include interests that have not been registered under the relevant securities
laws, resulting in a prohibition against transfer, sale, pledge or other
disposition of those mortgage-backed securities except in a transaction that is
exempt from the registration requirements of, or otherwise in accordance with,
those laws. Our ability to vary our portfolio in response to changes in
economic and other conditions may be relatively limited. No assurances can be
given that the fair market value of any of our assets will not decrease in the
future.
USE OF PROCEEDS
Unless otherwise specified in a prospectus supplement, we intend to use
the proceeds of any securities sold for general corporate purposes, including
acquisitions.
RATIO OF EARNINGS TO FIXED CHARGES
The following table displays our ratio of earnings to fixed charges.
For The Period
For Six Month March 24, 1998
Period Ended For Year Ended For Year Ended Through
June 30, 2001 December 31, 2000 December 31, 1999 December 31, 1998
------------- ----------------- ----------------- -----------------
Ratio of earnings to
fixed charges.......... 2.04X 1.77X 2.03X 0.94X
Earnings were inadequate to cover fixed charges (loss of $1.4 million)
for the fiscal year ended December 31, 1998. The loss included a non-recurring
realized loss of $18.44 million. Excluding the non-recurring loss, the ratio of
earnings to fixed charges was 1.69x.
RATIO OF COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS TO EARNINGS
For The Period
For Six Month March 24, 1998
Period Ended For Year Ended For Year Ended Through
June 30, 2001 December 31, 2000 December 31, 1999 December 31, 1998
------------- ----------------- ----------------- -----------------
Ratio of combined fixed
charges and preferred
stock dividends to
earnings.............. 1.71X 1.55X 2.01X 0.94X
8
DESCRIPTION OF SECURITIES
This prospectus contains a summary of the common stock, preferred stock,
debt securities and warrants to purchase our common stock or preferred stock.
These summaries are not meant to be a complete description of each security.
However, this prospectus and the accompanying prospectus supplement contain the
material terms and conditions for each security.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 500,000,000 shares of capital
stock, 400,000,000 of such shares being common stock, par value $.001 per
share, and 100,000,000 shares being preferred stock, par value $.001 per share,
issuable in one or more series. As of August 13, 2001, 35,364,012 shares of
common stock were issued and outstanding. 1,200,000 shares of 10.5% Series A
Senior Cumulative Convertible Redeemable Preferred Stock were issued and
outstanding as of June 30, 2001. The Series A Preferred Stock is convertible
into 4,105,694 shares of common stock at a conversion price of $7.35 per share.
2,212,697 shares of 10% Series B Preferred Stock were issued and outstanding as
of June 30, 2001. The Series B Preferred Stock is convertible into 3,236,828
shares of our common stock at a conversion price of $17.09 per share.
No warrants to purchase either common stock or preferred stock were
issued or outstanding as of June 30, 2001.
COMMON STOCK
VOTING RIGHTS. Each holder of common stock is entitled to one vote for
each share held on all matters to be voted upon by our stockholders, subject to
the provisions of our charter regarding the ownership of shares of common stock
in excess of the ownership limitations described below under "Repurchase of
Shares and Restrictions on Transfer".
DIVIDENDS. The holders of outstanding shares of common stock, subject to
any preferences that may be applicable to any outstanding series of preferred
stock, are entitled to receive ratably such dividends out of assets legally
available for that purpose at such times and in such amounts as the board of
directors may from time to time determine.
LIQUIDATION AND DISSOLUTION. Upon liquidation or dissolution of
Anthracite, the holders of the common stock will be entitled to share ratably
in our assets legally available for distribution to stockholders after payment
of, or provision for, all known debts and liabilities and subject to the prior
rights of any holders of any preferred stock then outstanding.
OTHER RIGHTS. Holders of the common stock generally have equal dividend,
distribution, liquidation and other rights, and shall have no preference,
conversion, exchange, appraisal, preemptive or cumulative voting rights. All
outstanding shares of the common stock are, and any common shares offered by a
prospectus supplement, when issued, will be, duly authorized, fully paid and
non-assessable by Anthracite.
TRANSFER AGENT AND REGISTRAR
The Bank of New York acts as transfer agent and registrar for the common
stock.
PREFERRED STOCK
GENERAL. We are authorized to issue 100,000,000 shares of preferred
stock. 1,200,000 shares of 10.5% Series A Senior Cumulative Convertible
Redeemable Preferred Stock were issued and outstanding as of June 30, 2001. The
Series A Preferred Stock is convertible into 4,105,694 shares of common stock at
9
a conversion price of $7.35 per share. 2,212,697 shares of 10% Series B
Preferred Stock were issued and outstanding as of June 30, 2001. The Series B
Preferred Stock is convertible into 3,236,828 shares of our common stock at a
conversion price of $17.09 per share. No warrants to purchase either common
stock or preferred stock were issued or outstanding as of June 30, 2001. Our
board of directors has the authority, without further action by the
stockholders, to issue shares of preferred stock in one or more series and to
fix the number of shares, dividend rights, conversion rights, voting rights,
redemption rights, liquidation preferences, sinking funds, and any other rights,
preferences, privileges and restrictions applicable to each such series of
preferred stock. The issuance of preferred stock could have the effect of making
an attempt to gain control of us more difficult by means of a merger, tender
offer, proxy contest or otherwise. The preferred stock, if issued, would have a
preference on dividend payments that could affect our ability to make dividend
distributions to the common stockholders. The preferred stock will, when issued,
be duly authorized, fully paid and non-assessable by Anthracite.
A prospectus supplement relating to any series of preferred stock being
offered will include specific terms relating to the offering. They will
include:
- the title and stated value of the preferred stock;
- the number of shares of the preferred stock offered, the liquidation
preference per share and the offering price of the preferred stock;
- the dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to the preferred stock;
- whether dividends shall be cumulative or non cumulative and, if
cumulative, the date from which dividends on the preferred stock shall
accumulate;
- the procedures for an auction and remarketing, if any, for the preferred
stock;
- the provisions for a sinking fund, if any, for the preferred stock;
- any voting rights of the preferred stock;
- the provisions for redemption, if applicable, of the preferred stock;
- any listing of the preferred stock on any securities exchange;
- the terms and conditions, if applicable, upon which the preferred stock
will be convertible into our common stock, including the conversion
price or the manner of calculating the conversion price and conversion
period;
- if appropriate, a discussion of Federal income tax consequences
applicable to the preferred stock;
- any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to assist us in qualifying
as a REIT;
- all series of preferred stock will rank on a parity with each other
unless otherwise specified in the charter and will rank senior to common
stock with respect payment of dividends and distribution of assets upon
liquidation; and
- any other specific terms, preferences, rights, limitations or
restrictions of the preferred stock.
CONVERSION OR EXCHANGE. The terms, if any, on which the preferred stock
may be convertible into or exchangeable for our common stock or other
securities will be stated in the preferred stock prospectus supplement. The
terms will include provisions as to whether conversion or exchange is mandatory,
10
at the option of the holder or at our option, and may include provisions
pursuant to which the number of shares of our common stock or other securities
to be received by the holders of preferred stock would be subject to adjustment.
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of preferred stock or common
stock. Warrants may be issued independently or together with any offered
securities and may be attached to or separate from such securities. Each series
of warrants will be issued under a separate warrant agreement to be entered
into between a warrant agent specified in the agreement and us. The warrant
agent will act solely as our agent in connection with the warrants of that
series and will not assume any obligation or relationship of agency or trust
for or with any holders or beneficial owners of warrants.
The applicable prospectus supplement will describe the following terms,
where applicable, of the warrants in respect of which this prospectus is being
delivered:
- the title of the warrants;
- the aggregate number of the warrants;
- the price or prices at which the warrants will be issued;
- the currencies in which the price or prices of the warrants may be
payable;
- the designation, amount and terms of the offered securities purchasable
- upon exercise of the warrants;
- the designation and terms of the other offered securities, if any, with
which the warrants are issued and the number of the warrants issued with
the security;
- if applicable, the date on and after which the warrants and the offered
securities purchasable upon exercise of the warrants will be separately
transferable;
- the price or prices at which and currency or currencies in which the
offered securities purchasable upon exercise of the warrants may be
purchased;
- the date on which the right to exercise the warrants shall commence and
the date on which the right shall expire;
- the minimum or maximum amount of the warrants which may be exercised at
any one time;
- information with respect to book-entry procedures, if any;
- if appropriate, a discussion of Federal income tax consequences; and
- any other material terms of the warrants, including terms, procedures
and limitations relating to the exchange and exercise of the warrants.
REPURCHASE OF SHARES AND RESTRICTIONS ON TRANSFER
Two of the requirements for qualification as a real estate investment
trust are that
(1) during the last half of each taxable year for which a REIT election is
made, other than the first taxable year for which a REIT election is
made, not more than 50% in value of the outstanding shares may be owned
directly or indirectly by five or fewer individuals. This requirement is
known as the "5/50 Rule"; and
11
(2) there must be at least 100 stockholders on 335 days of each taxable year
of 12 months, other than the first taxable year for which a REIT election
is made.
To assist us in meeting these requirements, the charter prohibits any
person from acquiring or holding, directly or indirectly, in excess of 9.8%, in
value or in number of shares, whichever is more restrictive, of the number of
our outstanding shares of common stock or any class of preferred stock. For
this purpose, the term "ownership" is defined in accordance with the REIT
Provisions of the Internal Revenue Code and the constructive ownership
provisions of Section 544 of the Internal Revenue Code, as modified by Section
856(h)(1)(B) of the Internal Revenue Code. Subject to certain limitations, our
board of directors may modify the ownership limitations provided such action
does not affect our qualification as a REIT.
For purposes of the 5/50 Rule, the constructive ownership provisions
applicable under Section 544 of the Internal Revenue Code
(1) attribute ownership of securities owned by a corporation, partnership,
estate or trust proportionately to its stockholders, partners or
beneficiaries,
(2) attribute ownership of securities owned by certain family members to
other members of the same family, and
(3) treat securities with respect to which a person has an option to purchase
as actually owned by that person.
These rules will be applied in determining whether a person holds shares
of common stock or preferred stock in violation of the ownership limitations
specified in the articles of amendment and restatement. Accordingly, under
certain circumstances, shares of common stock or preferred stock owned by a
person who individually owns less than 9.8% of the shares outstanding may
nevertheless be in violation of the ownership limitations specified in the
charter. Ownership of shares of common stock through such attribution is
generally referred to as constructive ownership. The 100 stockholder test is
determined by actual, and not constructive, ownership.
The articles of amendment and restatement further provide that if any
transfer of shares of common stock which, if effective, would
(1) result in any person beneficially or constructively owning shares of
common stock in excess or in violation of the 9.8% ownership limitations
described above,
(2) result in our stock being beneficially owned by fewer than 100 persons,
determined without reference to any rules of attribution, or
(3) result in us being "closely held" under Section 856(h) of the Internal
Revenue Code,
then that number of shares of common or preferred stock the beneficial or
constructive ownership of which otherwise would cause such person to violate
such limitations, rounded to the nearest whole shares, shall be automatically
transferred to a trustee as trustee of a trust for the exclusive benefit of one
or more charitable beneficiaries, and the intended transferee shall not acquire
any rights in such shares. Shares of common or preferred stock held by the
trustee shall be issued and outstanding shares of common or preferred stock.
The intended transferee shall not benefit economically from owning any shares
held in the trust, shall have no rights to dividends, and shall possess no
rights to vote or other rights attributable to the shares held in the trust.
The trustee shall have all voting rights and rights to dividends or other
distributions with respect to shares held in the trust, which will be exercised
for the exclusive benefit of the charitable beneficiary. Any dividend or other
distribution paid to the intended transferee before our discovery that shares
of common or preferred stock have been transferred to the trustee shall be paid
12
with respect to such shares to the trustee by the intended transferee upon
demand and any dividend or other distribution authorized but unpaid shall be
paid to the trustee. Our board of directors may, in its discretion, modify these
restrictions on owning shares in excess of the ownership limitations, to the
extent such modifications do not affect our qualification as a REIT.
Within 20 days of receiving notice from us that shares of common or
preferred stock have been transferred to the trust, the trustee shall sell the
shares held in the trust to a person, designated by the trustee, whose
ownership of the shares will not violate the ownership limitations specified in
the charter. Upon such sale, the interest of the charitable beneficiary in the
shares sold shall terminate and the trustee shall distribute the net proceeds
of the sale to the intended transferee and to the charitable beneficiary as
follows: The intended transferee shall receive the lesser of (1) the price paid
by the intended transferee for the shares or, if the intended transferee did
not give value for the shares in connection with the event causing the shares
to be held in the trust, e.g., in the case of a gift, devise or other such
transaction, the market price, as defined below, of the shares on the day of
the event causing the shares to be held in the trust, and (2) the price per
share received by the trustee from the sale or other disposition of the shares
held in the trust. Any net sales proceeds in excess of the amount payable to
the intended transferee shall be immediately paid to the charitable
beneficiary. In addition, shares of common or preferred stock transferred to
the trustee shall be deemed to have been offered for sale to us, or our
designee, at a price per share equal to the lesser of (1) the price per share
in the transaction that resulted in such transfer to the trust or, in the case
of a devise or gift, the market price at the time of such devise or gift, and
(2) the market price on the date we, or our designee, accept such offer. We
shall have the right to accept such offer until the trustee has sold shares
held in the trust. Upon such a sale to us, the interest of the charitable
beneficiary in the shares sold shall terminate and the trustee shall distribute
the net proceeds of the sale to the intended transferee.
The term "market price" on any date shall mean, with respect to any class
or series of outstanding shares of our stock, the closing price, as defined
below, for such shares on such date. The "closing price" on any date shall mean
the last sale price for such shares, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, for such shares, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if such shares are not
listed or admitted to trading on the New York Stock Exchange, as reported on
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which such
shares are listed or admitted to trading or, if such shares are not listed or
admitted to trading on any national securities exchange, the last quoted price,
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc., Automated Quotation Systems, or, if such system is no longer in
use, the principal other automated quotation system that may then be in use or,
if such shares are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in such shares selected by our board of directors or, in the event
that no trading price is available for such shares, the fair market value of
the shares, as determined in good faith by our board of directors.
Every owner of more than 5%, or such lower percentage as required by the
Internal Revenue Code or the regulations promulgated under the Internal Revenue
Code, of the outstanding shares or any class or series of our stock, within 30
days after the end of each taxable year, is required to give written notice to
us stating the name and address of such owner, the number of shares of each
class and series of our stock beneficially owned and a description of the
manner in which such shares are held. Each owner of more than 5% shall provide
to us additional information as we may request in order to determine the
effect, if any, of such beneficial ownership on our qualification as a REIT and
to ensure compliance with the ownership limitations.
13
MATERIAL PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS
The following is a summary of the material provisions of the Maryland
General Corporation Law, as amended from time to time, and of our charter and
bylaws. It does not restate the material provisions completely. We urge you to
read our charter and bylaws, copies of which are incorporated by reference into
the registration statement of which this prospectus is a part. See "Where You
Can Find More Information." For a description of additional restrictions on
transfer of the common stock, see "Description of Capital Stock--Repurchase of
Shares and Restrictions on Transfer."
REMOVAL OF DIRECTORS
The charter provides that a director may be removed from office at any
time for cause by the affirmative vote of the holders of at least two-thirds of
the votes of the shares entitled to be cast in the election of directors.
STAGGERED BOARD
The charter and bylaws divide the board of directors into three classes
of directors, each class constituting approximately one-third of the total
number of directors, with the classes serving staggered three-year terms. The
classification of the board of directors will make it more difficult for
stockholders to change the composition of the board of directors because only a
minority of the directors can be elected at any one time. The classification
provisions could also discourage a third party from accumulating our stock or
attempting to obtain control of us, even though this attempt might be
beneficial to us and some, or a majority, of our stockholders. Accordingly,
under certain circumstances stockholders could be deprived of opportunities to
sell their shares of common stock or preferred stock at a higher price than
might otherwise be available.
BUSINESS COMBINATIONS
Under the MGCL, certain "business combinations" including a merger,
consolidation, share exchange or, in some circumstances, an asset transfer or
issuance or reclassification of equity securities, between a Maryland
corporation and an "interested stockholder" or an affiliate of an interested
stockholder are prohibited for five years after the most recent date on which
the interested stockholder becomes an interested stockholder. An interested
stockholder is defined in the MGCL as any person who beneficially owns 10% or
more of the voting power of the corporation's shares or an affiliate of the
corporation who, at any time within the two-year period prior to the date in
question, was the beneficial owner of 10% or more of the voting power of the
then outstanding voting stock of the corporation. During the five year period,
any applicable business combination must be recommended by the board of
directors of that corporation and approved by the affirmative vote of at least
(a) 80% of the votes entitled to be cast by holders of outstanding shares of
voting stock of the corporation and
(b) two-thirds of the votes entitled to be cast by holders of voting Stock of
the corporation other than shares held by the interested stockholder with
whom, or with whose affiliate, the business combination is to be
effected, unless, among other conditions, the corporation's common
stockholders receive a minimum price, as defined in the MGCL, for their
shares and the consideration is received in cash or in the same form as
previously paid by the interested stockholder for its shares. The MGCL
does not apply, however, to business combinations that are approved or
exempted by the board of directors of the corporation before the
interested stockholder becomes an interested stockholder.
14
CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights except to the
extent approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquirer, by officers or by
directors who are employees of the corporation. "Control shares" are voting
shares of stock which, if aggregated with all other such shares of stock
previously acquired by the acquirer or in respect of which the acquirer is able
to exercise or direct the exercise of voting power, except solely by virtue of
a revocable proxy, would entitle the acquirer to exercise voting power in
electing directors within one of the following ranges of voting power:
(1) one-tenth or more but less than one-third,
(2) one-third or more but less than a majority or
(3) a majority or more of all voting power. Control shares do not
include shares the acquiring person is then entitled to vote as a
result of having previously obtained stockholder approval. A
"control share acquisition" means the acquisition of control
shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition,
upon satisfaction of certain conditions, including an undertaking to pay
expenses, may compel the board of directors of the corporation to call a
special meeting of stockholders to be held within 50 days of demand to consider
the voting rights of the shares. If no request for a meeting is made, the
corporation may itself present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by the
statute, then, subject to certain conditions and limitations, the corporation
may redeem any or all of the control shares, except those for which voting
rights have previously been approved, for fair value determined, without regard
to the absence of voting rights for the control shares, as of the date of the
last control share acquisition by the acquirer or of any meeting of
stockholders at which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a stockholders
meeting and the acquirer becomes entitled to vote a majority of the shares
entitled to vote, all other stockholders may exercise appraisal rights. The
fair value of the shares as determined for purposes of such appraisal rights
may not be less than the highest price per share paid by the acquirer in the
control share acquisition.
The control share acquisition statute does not apply
- to shares acquired in a merger, consolidation or share exchange if the
corporation is a party to the transaction, or
- to acquisitions approved or exempted by the charter or bylaws of the
corporation.
Our bylaws contain a provision exempting from the control share
acquisition statute any and all acquisitions by any person of our shares of
common stock. We cannot give any assurance that such provision will not be
amended or eliminated at any time in the future.
AMENDMENT TO THE CHARTER
We reserve the right from time to time to make any amendment to our
charter that is authorized by law at present or in the future, including any
amendment which alters the contract rights as expressly stated in the charter,
15
of any shares of outstanding stock. The charter may be amended only by the
affirmative vote of holders of shares entitled to cast at least a majority of
all the votes entitled to be cast on the matter; provided, however, that
provisions relating to the indemnification of our present and former directors
and officers, our election to be taxed as a REIT, the removal of directors for
cause and dissolution of Anthracite may be amended only by the affirmative vote
of a majority of the board of directors and the holders of shares entitled to
cast at least two-thirds of all the votes entitled to be cast in the election of
directors.
DISSOLUTION OF ANTHRACITE
The dissolution of Anthracite must be approved by the affirmative vote of
at least two-thirds of all of the votes ordinarily entitled to be cast in the
election of directors, voting together as a single class, and the affirmative
vote of holders of at least two-thirds of any series or class of stock
expressly granted a series or class vote on the dissolution of Anthracite in
the resolutions providing for such series or class. Before such vote, the
dissolution must be approved by a majority of the board of directors.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
The bylaws provide that
(a) with respect to an annual meeting of stockholders, nominations of persons
for election to the board of directors and the proposal of business to be
considered by stockholders may be made only
(1) pursuant to our notice of the meeting,
(2) by the board of directors or,
(3) by a stockholder who is entitled to vote at the meeting and has
complied with the advance notice procedures specified in the
bylaws, and
(b) with respect to special meetings of stockholders, only the business
specified in our notice of meeting may be brought before the meeting of
stockholders and nominations of persons for election to the board of
directors or
(c) provided that the board of directors has determined that directors shall
be elected at such meeting, by a stockholder who is entitled to vote at
the meeting and has complied with the advance notice provisions specified
in the bylaws.
POSSIBLE ANTI-TAKEOVER EFFECT OF MATERIAL PROVISIONS OF MARYLAND LAW AND OF THE
CHARTER AND BYLAWS
The business combination provisions and, if the applicable provision in
the bylaws is rescinded, the control share acquisition provisions of the MGCL,
the provisions of the charter creating a staggered board and the advance notice
provisions of the bylaws could delay, defer or prevent a change in control of
Anthracite or other transaction that might involve a premium price for holders
of our common stock or otherwise be in their best interest.
REPORTS TO STOCKHOLDERS
We will furnish our stockholders with annual reports containing audited
financial statements and such other periodic reports as we may determine to
furnish or as may be required by law.
16
DESCRIPTION OF DEBT SECURITIES
The following description contains general terms and provisions of the
debt securities to which any prospectus supplement may relate. The particular
terms of the debt securities offered by any prospectus supplement and the
extent, if any, to which such general provisions may not apply to the debt
securities so offered will be described in the prospectus supplement relating
to such debt securities. For more information please refer to the senior
indenture among a trustee to be selected and us, relating to the issuance of
the senior notes, and the subordinated indenture among a trustee to be
selected and us, relating to issuance of the subordinated notes. Forms of
these documents are filed as exhibits to the registration statement, which
includes this prospectus.
As used in this prospectus, the term indentures refers to both the
senior indenture and the subordinated indenture. The indentures will be
qualified under the Trust Indenture Act. As used in this prospectus, the term
trustee refers to either the senior trustee or the subordinated trustee, as
applicable.
The following are summaries of material provisions of the senior
indenture and the subordinated indenture. They do not restate the indentures
in their entirety. We urge you to read the indentures applicable to a
particular series of debt securities because they, and not this description,
define your rights as the holders of the debt securities. Except as otherwise
indicated, the terms of the senior indenture and the subordinated indenture
are identical.
GENERAL
Each prospectus supplement will describe the following terms relating to
a series of notes:
- the title;
- any limit on the amount that may be issued;
- whether or not such series of notes will be issued in global form, the
terms and who the depository will be;
- the maturity date(s);
- the annual interest rate(s) (which may be fixed or variable) or the
method for determining the rate(s) and the date(s) interest will begin
to accrue, the date(s) interest will be payable and the regular record
dates for interest payment dates or the method for determining such
date(s);
- the place(s) where payments shall be payable;
- our right, if any, to defer payment of interest and the maximum length
of any such deferral period;
- the date, if any, after which, and the price(s) at which, such series of
notes may, pursuant to any optional redemption provisions, be redeemed
at our option, and other related terms and provisions;
- the date(s), if any, on which, and the price(s) at which we are
obligated, pursuant to any mandatory sinking fund provisions or
otherwise, to redeem, or at the Holder's option to purchase, such series
of notes and other related terms and provisions;
- the denominations in which such series of notes will be issued, if in
other than denominations of $1,000 and any integral multiple thereof;
and
- any mandatory or optional sinking fund or similar provisions;
17
- the currency or currency units of payment of the principal of, premium,
if any, and interest on the notes;
- any index used to determine the amount of payments of the principal of,
premium, if any, and interest on the notes and the manner in which such
amounts shall be determined;
- the terms pursuant to which such notes are subject to defeasance;
- the terms and conditions, if any, pursuant to which such notes are
secured;
- any other terms (which terms shall not be inconsistent with the
Indenture).
The notes may be issued as original issue discount securities. An
original issue discount security is a note, including any zero-coupon note,
which:
- is issued at a price lower than the amount payable upon its stated
maturity and
- provides that upon redemption or acceleration of the maturity, an
amount less than the amount payable upon the stated maturity, shall
become due and payable.
United States federal income tax consequences applicable to notes sold at
an original issue discount will be described in the applicable prospectus
supplement. In addition, United States federal income tax or other consequences
applicable to any notes which are denominated in a currency or currency unit
other than United States dollars may be described in the applicable prospectus
supplement.
Under the indentures, we will have the ability, in addition to the
ability to issue notes with terms different from those of notes previously
issued, without the consent of the holders, to reopen a previous issue of a
series of notes and issue additional notes of that series, unless the reopening
was restricted when the series was created, in an aggregate principal amount
determined by us.
CONVERSION OR EXCHANGE RIGHTS
The terms, if any, on which a series of notes may be convertible into or
exchangeable for our common stock or other securities will be described in the
prospectus supplement relating to that series of notes. The terms will include
provisions as to whether conversion or exchange is mandatory, at the option of
the holder or at our option, and may include provisions pursuant to which the
number of shares of our common stock or other securities to be received by the
holders of the series of notes would be subject to adjustment.
CONSOLIDATION, MERGER OR SALE
The indentures do not contain any covenant which restricts our ability to
merge or consolidate, or sell, convey, transfer or otherwise dispose of all or
substantially all of their assets. However, any successor or acquirer of such
assets must assume all of our obligations under the indentures or the notes, as
appropriate.
EVENTS OF DEFAULT UNDER THE INDENTURE
The following are events of default under the indentures with respect to
any series of notes issued:
- failure to pay interest when due and such failure continues for 30 days
and the time for payment has not been extended or deferred;
- failure to pay the principal (or premium, if any) when due;
18
- failure to observe or perform any other covenant contained in the notes
or the indentures (other than a covenant specifically relating to
another series of notes), and such failure continues for 90 days after
we receive notice from the trustee or holders of at least 25% in
aggregate principal amount of the outstanding notes of that series; and
- certain events of bankruptcy, insolvency or reorganization of
Anthracite.
If an event of default with respect to notes of any series occurs and is
continuing, the trustee or the holders of at least 25% in aggregate principal
amount of the outstanding notes of that series, by notice in writing to us (and
to the trustee if notice is given by such holders), may declare the unpaid
principal of, premium, if any, and accrued interest, if any, due and payable
immediately.
The holders of a majority in principal amount of the outstanding notes of
an affected series may waive any default or event of default with respect to
such series and its consequences, except defaults or events of default
regarding:
- payment of principal, premium, if any, or interest; or
- certain covenants containing limitations on our ability to pay dividends
and make payments on debt securities in certain circumstances.
Any such waiver shall cure such default or event of default.
Subject to the terms of the indentures, if an event of default under an
indenture shall occur and be continuing, the trustee will be under no
obligation to exercise any of its rights or powers under such indenture at the
request or direction of any of the holders of the applicable series of notes,
unless such holders have offered the trustee reasonable indemnity. The holders
of a majority in principal amount of the outstanding notes of any series will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee, or exercising any trust or
power conferred on the trustee, with respect to the notes of that series,
provided that:
- it is not in conflict with any law or the applicable indenture;
- the trustee may take any other action deemed proper by it which is not
inconsistent with such direction; and
- subject to its duties under the Trust Indenture Act, the trustee need
not take any action that might involve it in personal liability or might
be unduly prejudicial to the holders not involved in the proceeding.
A holder of the notes of any series will only have the right to institute
a proceeding under the indentures or to appoint a receiver or trustee, or to
seek other remedies if:
- the holder has given written notice to the trustee of a continuing event
of default with respect to that series;
- the holders of at least 25% in aggregate principal amount of the
outstanding notes of that series have made written request, and such
holders have offered reasonable indemnity to the trustee to institute
such proceedings as trustee; and
- the trustee does not institute such proceeding, and does not receive
from the holders of a majority in the aggregate principal amount of the
outstanding notes of that series other conflicting directions within 60
days after such notice, request and offer.
These limitations do not apply to a suit instituted by a holder of notes
if we default in the payment of the principal, premium, if any, or interest on,
the notes.
19
We will periodically file statements with the trustee regarding our
compliance with certain of the covenants in the indentures.
MODIFICATION OF INDENTURE; WAIVER
Anthracite and the trustee may change an indenture without the consent of
any holders with respect to certain matters, including:
- to fix any ambiguity, defect or inconsistency in such indenture; and
- to change anything that does not materially adversely affect the
interests of any holder of notes of any series.
In addition, under the indentures, the rights of holders of a series of
notes may be changed by us and the trustee with the written consent of the
holders of at least a majority in aggregate principal amount of the outstanding
notes of each series that is affected. However, we can make the following
changes only with the consent of each holder of any outstanding notes affected:
- extending the fixed maturity of such series of notes;
- change any of our obligations to pay additional amounts;
- reducing the principal amount, reducing the rate of or extending the
time of payment of interest, or any premium payable upon the redemption
of any such notes;
- reducing the percentage of notes, the holders of which are required to
consent to any amendment.
- reduce the amount of principal of an original issue discount security or
any other note payable upon acceleration of the maturity thereof,
- change currency in which any note or any premium or interest is payable,
- impair the right to enforce any payment on or with respect to any note,
- adversely change the right to convert or exchange, including decreasing
the conversion rate or increasing the conversion price of, such note, if
applicable,
- in the case of the subordinated indenture, modify the subordination
provisions in a manner adverse to the holders of the subordinated notes,
- if the notes are secured, change the terms and conditions pursuant to
which the notes are secured in a manner adverse to the holders of the
secured notes,
- reduce the percentage in principal amount of outstanding notes of any
series, the consent of whose holders is required for modification or
amendment of the applicable indenture or for waiver of compliance with
certain provisions of the applicable indenture or for waiver of certain
defaults,
- reduce the requirements contained in the applicable indenture for quorum
or voting,
- change any of our obligations to maintain an office or agency in the
places and for the purposes required by the indentures, or
- modify any of the above provisions.
20
FORM, EXCHANGE, AND TRANSFER
The notes of each series will be issuable only in fully registered form
without coupons and, unless otherwise specified in the applicable prospectus
supplement, in denominations of $1,000 and any integral multiple thereof. The
indentures will provide that notes of a series may be issuable in temporary or
permanent global form and may be issued as book-entry securities that will be
deposited with, or on behalf of, The Depository Trust Company or another
depository named by us and identified in a prospectus supplement with respect
to such series.
At the option of the holder, subject to the terms of the indentures and
the limitations applicable to global securities described in the applicable
prospectus supplement, notes of any series will be exchangeable for other notes
of the same series, in any authorized denomination and of like tenor and
aggregate principal amount.
Subject to the terms of the indentures and the limitations applicable to
global securities described in the applicable prospectus supplement, notes may
be presented for exchange or for registration of transfer, duly endorsed or
with the form of transfer endorsed, duly executed if so required by us or the
security registrar, at the office of the security registrar or at the office of
any transfer agent designated by us for such purpose. Unless otherwise provided
in the notes to be transferred or exchanged, we will not require a service
charge for any registration of transfer or exchange, but we may require payment
of any taxes or other governmental charges. The security registrar and any
transfer agent initially designated by us for any notes will be named in the
applicable prospectus supplement. We may at any time designate additional
transfer agents or rescind the designation of any transfer agent or approve a
change in the office through which any transfer agent acts, except that we will
be required to maintain a transfer agent in each place of payment for the notes
of each series.
If the notes of any series are to be redeemed, we will not be required
to:
- issue, register the transfer of, or exchange any notes of that series
during a period beginning at the opening of business 15 days before the
day of mailing of a notice of redemption of any such notes that may be
selected for redemption and ending at the close of business on the day
of such mailing; or
- register the transfer of or exchange any notes so selected for
redemption, in whole or in part, except the unredeemed portion of any
such notes being redeemed in part.
INFORMATION CONCERNING THE TRUSTEE
The trustee, other than during the occurrence and continuance of an event
of default under an indenture, undertakes to perform only such duties as are
specifically described in the indentures and, upon an event of default under an
indenture, must use the same degree of care as a prudent person would exercise
or use in the conduct of his or her own affairs. Subject to this provision, the
trustee is under no obligation to exercise any of the powers given it by the
indentures at the request of any holder of notes unless it is offered
reasonable security and indemnity against the costs, expenses and liabilities
that it might incur. The trustee is not required to spend or risk its own money
or otherwise become financially liable while performing its duties unless it
reasonably believes that it will be repaid or receive adequate indemnity.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable prospectus supplement,
payment of the interest on any notes on any interest payment date will be made
to the person in whose name such notes or one or more predecessor securities
are registered at the close of business on the regular record date for such
interest.
21
Principal of and any premium and interest on the notes of a particular
series will be payable at the office of the paying agents designated by us,
except that unless otherwise indicated in the applicable prospectus supplement,
interest payments may be made by check mailed to the holder. Unless otherwise
indicated in such prospectus supplement, the corporate trust office of the
trustee in The City of New York will be designated as our sole paying agent for
payments with respect to notes of each series. Any other paying agents
initially designated by us for the notes of a particular series will be named
in the applicable prospectus supplement. We will be required to maintain a
paying agent in each place of payment for the notes of a particular series.
All moneys paid by us to a paying agent or the trustee for the payment of
the principal of or any premium or interest on any notes which remains
unclaimed at the end of two years after the principal, premium or interest has
become due and payable will be repaid to us, and the holder of the security may
then look only to us for payment.
GOVERNING LAW
The indentures and the notes will be governed by and construed in
accordance with the laws of the State of New York except to the extent that the
Trust Indenture Act shall be applicable.
SUBORDINATION OF SUBORDINATED NOTES
The subordinated notes will be unsecured and will be subordinate and
junior in priority of payment to certain of our other indebtedness to the
extent described in a prospectus supplement. The subordinated indenture does
not limit the amount of subordinated notes which we may issue, nor does it
limit us from issuing any other secured or unsecured debt.
FEDERAL INCOME TAX CONSIDERATIONS
THE FOLLOWING IS A SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES THAT
ARE ANTICIPATED TO BE MATERIAL TO AN INVESTOR IN THE COMMON STOCK OF
ANTHRACITE. THIS SUMMARY IS BASED ON CURRENT LAW, IS FOR GENERAL INFORMATION
ONLY AND IS NOT TAX ADVICE. THE TAX CONSEQUENCES RELATED TO AN INVESTMENT IN
ANTHRACITE MAY VARY DEPENDING ON AN INVESTOR'S PARTICULAR SITUATION AND THIS
DISCUSSION DOES NOT PURPORT TO DISCUSS ALL ASPECTS OF TAXATION THAT MAY BE
RELEVANT TO A HOLDER OF OUR SECURITIES IN LIGHT OF HIS OR HER PERSONAL
INVESTMENT OR TAX CIRCUMSTANCES, OR TO HOLDERS OF OUR SECURITIES SUBJECT TO
SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. INVESTORS SUBJECT TO
SPECIAL TREATMENT INCLUDE, WITHOUT LIMITATION, INSURANCE COMPANIES, FINANCIAL
INSTITUTIONS, BROKER-DEALERS, TAX- EXEMPT ORGANIZATIONS, INVESTORS HOLDING
SECURITIES AS PART OF A CONVERSION TRANSACTION, OR A HEDGE OR HEDGING
TRANSACTION OR AS A POSITION IN A STRADDLE FOR TAX PURPOSES, FOREIGN
CORPORATIONS OR PARTNERSHIPS, AND PERSONS WHO ARE NOT CITIZENS OR RESIDENTS OF
THE UNITED STATES. IN ADDITION, THE SUMMARY BELOW DOES NOT CONSIDER THE EFFECT
OF ANY FOREIGN, STATE, LOCAL OR OTHER TAX LAWS THAT MAY BE APPLICABLE TO YOU AS
A HOLDER OF OUR SECURITIES.
Based on various factual representations made by us regarding our
operations and income, in the opinion of Skadden, Arps, Slate, Meagher & Flom
LLP, our tax counsel, commencing with our taxable year ended December 31, 1998,
we have been organized in conformity with the requirements for qualification as
a REIT under the Code, and our method of operating has enabled us, and will
enable us, to meet the requirements for qualification and taxation as a REIT.
It must be emphasized that this opinion is: based on various assumptions
relating to the validity, authenticity, accuracy and enforceability of documents
22
delivered by us to Skadden, Arps, Slate, Meagher & Flom LLP; and conditioned
upon representations made by us, as to various factual matters. Moreover, our
qualification as a REIT depends upon our ability to meet the various
requirements imposed under the Code through actual operations. Skadden, Arps,
Slate, Meagher & Flom LLP will not review our operations, and no assurance can
be given that actual operations will meet these requirements. The opinion of
Skadden, Arps, Slate, Meagher & Flom LLP is not binding on the IRS or any court.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is based upon existing
law, IRS regulations and currently published administrative positions of the IRS
and judicial decisions, all of which are subject to change either prospectively
or retroactively.
The information in this summary is based on the Internal Revenue Code of
1986, as amended, (the "Code") current, temporary and proposed Treasury
regulations promulgated under the Code, the legislative history of the Code,
current administrative interpretations and practices of the Internal Revenue
Service, and court decisions, all as of the date of this prospectus. The
administrative interpretations and practices of the Internal Revenue Service
upon which this summary is based include its practices and policies as
expressed in private letter rulings which are not binding on the Internal
Revenue Service, except with respect to the taxpayers who requested and
received such rulings. Future legislation, Treasury regulations, administrative
interpretations and practices, and court decisions may affect the tax
consequences contained in this summary, possibly on a retroactive basis. We
have not requested, and do not plan to request, any rulings from the Internal
Revenue Service concerning our tax treatment, and the statements in this
prospectus are not binding on the Internal Revenue Service or a court. Thus, we
can provide no assurance that the tax consequences contained in this summary
will not be challenged by the Internal Revenue Service or sustained by a court
if challenged by the Internal Revenue Service.
You are urged to consult your tax advisor regarding the specific tax
consequences to you of (1) the acquisition, ownership and sale or other
disposition of our securities, including the federal, state, local, foreign and
other tax consequences, (2) our election to be taxed as a real estate
investment trust for federal income tax purposes and (3) potential changes in
applicable tax laws.
TAXATION OF ANTHRACITE -- GENERAL
Commencing with our taxable year ended December 31, 1998, we have elected
to be taxed as a REIT under Sections 856 through 860 of the Code. We believe we
have been organized and have operated in a manner which allows us to qualify
for taxation as a REIT under the Code, and we intend to continue to operate in
this manner. Our qualification and taxation as a REIT, however, depend upon our
ability to meet, through actual annual operating results, asset requirements,
distribution levels, diversity of stock ownership, and the various other
qualification tests imposed under the Code. Accordingly, there can be no
assurance that we have operated or will continue to operate in a manner so as
to qualify or remain qualified as a REIT. See "--Failure to Qualify."
The sections of the Code that relate to the qualification and taxation of
REITs are highly technical and complex. The following describes the material
aspects of the sections of the Code that govern the Federal income tax
treatment of a REIT and its stockholders. This summary is qualified in its
entirety by the applicable Code provisions, rules and regulations promulgated
under the Code, and administrative and judicial interpretations of the Code.
Provided we qualify for taxation as a REIT, we generally will not be
subject to Federal corporate income tax on our net income that is currently
distributed to our stockholders. This treatment substantially eliminates the
"double taxation" that generally results from an investment in a corporation.
Double taxation means taxation once at the corporate level when income is
earned and
23
once again at the stockholder level when such income is distributed. Even if we
qualify for taxation as a REIT, however, we will be subject to Federal income
taxation as follows:
- We will be required to pay tax at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital
gains.
- We may be required to pay the "alternative minimum tax" on items of tax
preference, if any.
- If we have (a) net income from the sale or other disposition of
"foreclosure property" which is held primarily for sale to customers in
the ordinary course of business or (b) other nonqualifying income from
foreclosure property, we will be required to pay tax at the highest
corporate rate on this income. In general, foreclosure property is
property acquired through foreclosure after a default on a loan secured
by the property or on a lease of the property.
- We will be required to pay a 100% tax on any net income from prohibited
transactions. In general, prohibited transactions are sales or other
taxable dispositions of property, other than foreclosure property, held
for sale to customers in the ordinary course of business. Further we
will be required to pay a 100% tax in respect of amounts that are
treated by us as rents from real property but are properly allocable or
attributable under the Code to services rendered by a taxable REIT
subsidiary (see below).
- If we fail to satisfy the 75% or 95% gross income tests, as described
below, but have maintained our qualification as a REIT, we will be
required to pay a 100% tax on an amount equal to (a) the gross income
attributable to the greater of the amount by which we fail the 75% or
95% gross income test multiplied by (b) a fraction intended to reflect
our profitability.
- We will be required to pay a 4% excise tax on the amount by which our
annual distributions to our stockholders is less than the sum of (1) 85%
of our ordinary income for the year, (2) 95% of our real estate
investment trust capital gain net income for the year, and (3) any
undistributed taxable income from prior periods.
- If we acquire an asset from a corporation which is not a REIT in a
transaction in which the basis of the asset in our hands is determined
by reference to the basis of the asset in the hands of the transferor
corporation, and we subsequently sell the asset within ten years, then
under Treasury regulations not yet finalized, we would be required to
pay tax at the highest regular corporate tax rate on this gain to the
extent (a) the fair market value of the asset exceeds (b) our adjusted
tax basis in the asset, in each case, determined as of the date on which
we acquired the asset. The results described in this paragraph assume
that we will elect this treatment in lieu of an immediate tax when the
asset is acquired.
- We will generally be subject to tax on the portion of any "excess
inclusion" income derived from an investment in residual interests in
real estate mortgage investment conduits to the extent our stock is held
by specified tax exempt organizations not subject to tax on unrelated
business taxable income.
REQUIREMENTS FOR QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST
The Code defines a REIT as a corporation, trust or association:
(1) that is managed by one or more trustees or directors;
(2) that issues transferable shares or transferable certificates of
beneficial ownership to its owners;
(3) that would be taxable as a regular corporation, but for its
election to be taxed as a REIT;
24
(4) that is not a financial institution or an insurance company under
the Code;
(5) that is owned by 100 or more persons;
(6) not more than 50% in value of the outstanding stock of which is
owned, actually or constructively, by five or fewer individuals,
as defined in the Code to include some entities, during the last
half of each year; and
(7) that meets other tests, described below, regarding the nature of
its income and assets, and the amount of its distributions.
The Code provides that conditions (1) to (4) must be met during the
entire year and that condition (5) must be met during at least 335 days of a
year of twelve months, or during a proportionate part of a shorter taxable
year. Conditions (5) and (6) do not apply to the first taxable year for which
an election is made to be taxed as a REIT. For purposes of condition (6), tax-
exempt entities are generally treated as individuals, subject to a "look-
through" exception for pension funds.
Our charter provides for restrictions regarding ownership and transfer of
our stock. These restrictions are intended to assist us in satisfying the share
ownership requirements described in (5) and (6) above. These stock ownership
and transfer restrictions are described in "Description of Capital Stock--
Restrictions on Ownership and Transfer." These restrictions, however, may not
ensure that we will, in all cases, be able to satisfy the share ownership
requirements described in (5) and (6) above. If we fail to satisfy these share
ownership requirements, our status as a REIT would terminate. If, however, we
comply with the rules contained in applicable Treasury regulations that require
us to determine the actual ownership of our shares and we do not know, or would
not have known through the exercise of reasonable diligence, that we failed to
meet the requirement described in condition (6) above, we would not be
disqualified as a REIT.
In addition, a corporation may not qualify as a REIT unless its taxable
year is the calendar year. We have and will continue to have a calendar taxable
year.
OWNERSHIP OF A PARTNERSHIP INTEREST
The Treasury regulations provide that if we are a partner in a
partnership, we will be deemed to own our proportionate share of the assets of
the partnership, and we will be deemed to be entitled to our proportionate
share of the gross income of the partnership. The character of the assets and
gross income of the partnership generally retains the same character in our
hands for purposes of satisfying the gross income and asset tests described
below.
TAXABLE REIT SUBSIDIARIES
REITs are permitted to own up to 100% of the shares in a corporation that
elects to be treated as a taxable REIT subsidiary ("taxable REIT subsidiary").
In order to obtain taxable REIT subsidiary status, the corporation and the REIT
must file a joint election with the Internal Revenue Service. A taxable REIT
subsidiary pays tax at regular corporate income rates on any income it earns.
Moreover, the Code contains rules (including a limitation on interest
deductions and rules requiring the imposition of taxes on the REIT at a rate of
100% on certain reallocated income and expenses) to ensure that contractual
arrangements between a taxable REIT subsidiary and its beneficial owners are at
arm's length. Securities in taxable REIT subsidiaries will not qualify as "real
estate assets" for the purposes of the 75% asset test described below under the
heading Federal Income Tax Considerations--Asset Test.
QUALIFIED REIT SUBSIDIARIES
A "qualified REIT subsidiary" is a corporation, all of the stock of which
is owned by a REIT. Under the Code, a qualified REIT subsidiary is not treated
as a separate corporation from the REIT. Rather, all of the assets, liabilities,
25
and items of income, deduction, and credit of the qualified REIT subsidiary are
treated as the assets, liabilities, and items of income, deduction, and credit
of the REIT for purposes of the REIT income and asset tests described below. A
qualified REIT subsidiary does not include a corporation that elects to be
treated as a taxable REIT subsidiary.
INCOME TESTS
We must meet two annual gross income requirements to qualify as a REIT.
First, each year we must derive, directly or indirectly, at least 75% of our
gross income, excluding gross income from prohibited transactions, from
investments relating to real property or mortgages on real property, including
"rents from real property" and mortgage interest, or from specified temporary
investments. Second, each year we must derive at least 95% of our gross income,
excluding gross income from prohibited transactions, from investments meeting
the 75% test described above, or from dividends, interest and gain from the
sale or disposition of stock or securities. For these purposes, the term
"interest" generally does not include any interest of which the amount received
depends on the income or profits of any person. An amount will generally not be
excluded from the term "interest," however, if such amount is based on a fixed
percentage of receipts or sales.
Any amount includable in gross income by us with respect to a regular or
residual interest in a real estate mortgage investment conduit is generally
treated as interest on an obligation secured by a mortgage on real property for
purposes of the 75% gross income test. If, however, less than 95% of the assets
of a real estate mortgage investment conduit consist of real estate assets, we
will be treated as receiving directly our proportionate share of the income of
the real estate mortgage investment conduit, which would generally include non-
qualifying income for purposes of the 75% gross income test. In addition, if we
receive interest income with respect to a mortgage loan that is secured by both
real property and other property and the principal amount of the loan exceeds
the fair market value of the real property on the date we purchased the
mortgage loan, interest income on the loan will be apportioned between the real
property and the other property, which apportionment would cause us to
recognize income that is not qualifying income for purposes of the 75% gross
income test.
In general, and subject to the exceptions in the preceding paragraph, the
interest, original issue discount, and market discount income that we derive
from investments in mortgage backed securities, and mortgage loans will be
qualifying interest income for purposes of both the 75% and the 95% gross
income tests. It is possible, however, that interest income from a mortgage
loan may be based in part on the borrower's profits or net income, which would
generally disqualify such interest income for purposes of both the 75% and the
95% gross income tests.
We may acquire construction loans or mezzanine loans that have shared
appreciation provisions. To the extent interest on a loan is based on the cash
proceeds from the sale or value of property, income attributable to such
provision would be treated as gain from the sale of the secured property, which
generally should qualify for purposes of the 75% and 95% gross income tests.
We may employ, to the extent consistent with the REIT Provisions of the
Code, forms of securitization of our assets under which a "sale" of an interest
in a mortgage loan occurs, and a resulting gain or loss is recorded on our
balance sheet for accounting purposes at the time of sale. In a "sale"
securitization, only the net retained interest in the securitized mortgage
loans would remain on our balance sheet. We may elect to conduct certain of our
securitization activities, including such sales, through one or more taxable
subsidiaries, or through qualified REIT subsidiaries, formed for such purpose.
To the extent consistent with the REIT Provisions of the Code, such entities
could elect to be taxed as real estate mortgage investment conduits or
financial asset securitization investment trusts.
26
If we fail to satisfy one or both of the 75% or 95% gross income tests
for any year, we may still qualify as a REIT if we are entitled to relief
under the Code. Generally, we may be entitled to relief if:
- our failure to meet the gross income tests was due to reasonable cause and
not due to willful neglect;
- we attach a schedule of the sources of our income to our Federal income
tax return; and
- any incorrect information on the schedule was not due to fraud with the
intent to evade tax.
It is not possible to state whether in all circumstances we would be
entitled to rely on these relief provisions. If these relief provisions do not
apply to a particular set of circumstances, we would not qualify as a REIT. As
discussed above in "--Taxation of Anthracite--General", even if these relief
provisions apply, and we retain our status as a REIT, a tax would be imposed
with respect to our income that does not meet the gross income tests. We may
not always be able to maintain compliance with the gross income tests for REIT
qualification despite periodically monitoring our income.
FORECLOSURE PROPERTY
Net income realized by us from foreclosure property would generally be
subject to tax at the maximum Federal corporate tax rate. Foreclosure property
includes real property and related personal property that (1) is acquired by
us through foreclosure following a default on indebtedness owed to us that is
secured by the property and (2) for which we make an election to treat the
property as foreclosure property.
PROHIBITED TRANSACTION INCOME
Any gain realized by us on the sale of any property, other than
foreclosure property, held as inventory or otherwise held primarily for sale
to customers in the ordinary course of business will be prohibited transaction
income, and subject to a 100% penalty tax. This prohibited transaction income
may also adversely affect our ability to satisfy the gross income tests for
qualification as a REIT. Whether property is held as inventory or primarily
for sale to customers in the ordinary course of a trade or business depends on
all the facts and circumstances surrounding the particular transaction. While
the Treasury regulations provide standards which, if met, would not result in
prohibited transaction income, we may not be able to meet these standards in
all circumstances.
HEDGING TRANSACTIONS
We may enter into hedging transactions with respect to one or more of our
assets or liabilities. Our hedging transactions could take a variety of forms,
including interest rate swaps or cap agreements, options, futures contracts,
forward rate agreements, or similar financial instruments. To the extent that
we enter into hedging transactions to reduce our interest rate risk on
indebtedness incurred to acquire or carry real estate assets, any income, or
gain from the disposition of hedging transactions should be qualifying income
for purposes of the 95% gross income test, but not the 75% gross income test.
ASSET TESTS
At the close of each quarter of each year, we also must satisfy four
tests relating to our assets.
First, at least 75% of the value of our total assets must be real estate
assets, cash, cash items and government securities. For purposes of this test,
real estate assets include real estate mortgages, real property, interests in
other REITs and stock or debt instruments held for one year or less that are
purchased with the proceeds of a stock offering or a long-term public debt
offering.
27
Second, not more than 25% of our total assets may be represented by
securities, other than those securities includable in the 75% asset class.
Third, of the investments included in the 25% asset class, the value of
any one issuer's securities that we hold may not exceed 5% of the value of our
total assets, and we may not own more than 10% of the total voting power or
more than 10% of the value of the outstanding securities of any corporation
which is not a REIT, a qualified REIT subsidiary or a taxable REIT subsidiary.
Under a transition rule, the limitation on owning more than 10% of the value of
the outstanding securities of a corporation does not apply to securities held
on July 12, 1999, provided the issuer of those securities does not engage in a
substantial new line of business or acquire substantial new assets after that
date and provided that we do not acquire additional securities in such issuer
after that date.
Finally, under new rules, effective from 1 January 2001, no more than 20%
of the value of a REIT's total assets may be represented by securities of one
or more taxable REIT subsidiaries.
We expect that any mortgage backed securities, real property, and
temporary investments that we acquire will generally be qualifying assets for
purposes of the 75% asset test, except to the extent that less than 95% of the
assets of a real estate mortgage investment conduit in which we own an interest
consists of "real estate assets." Mortgage loans, including distressed mortgage
loans, construction loans, bridge loans, and mezzanine loans also will
generally be qualifying assets for purposes of the 75% asset test to the extent
that the principal balance of each mortgage loan does not exceed the value of
the associated real property.
We anticipate that we may securitize all or a portion of the mortgage
loans which we acquire, in which event we will likely retain certain of the
subordinated and interest only classes of mortgage backed securities which may
be created as a result of such securitization. The securitization of mortgage
loans may be accomplished through one or more real estate mortgage investment
conduits established by us or, if a non-real estate mortgage investment conduit
securitization is desired, through one or more qualified REIT subsidiaries or
taxable subsidiaries established by us. The securitization of the mortgage
loans through either one or more real estate mortgage investment conduits or
one or more qualified REIT subsidiaries or taxable subsidiaries should not
affect our qualification as a REIT or result in the imposition of corporate
income tax under the taxable mortgage pool rules. Income realized by us from a
real estate mortgage investment conduit securitization could, however, be
subject to a 100% tax as a "prohibited transaction." See "--Prohibited
Transaction Income."
After meeting the asset tests at the close of any quarter, we will not
lose our status as a REIT if we fail to satisfy the asset tests at the end of a
later quarter solely by reason of changes in asset values. In addition, if we
fail to satisfy the asset tests because we acquire securities or other property
during a quarter, we can cure this failure by disposing of sufficient
nonqualifying assets within 30 days after the close of that quarter.
We will monitor the status of the assets that we acquire for purposes of
the various asset tests and we will manage our portfolio in order to comply
with such tests.
ANNUAL DISTRIBUTION REQUIREMENTS
To qualify as a REIT, we are required to distribute dividends, other than
capital gain dividends, to our stockholders in an amount at least equal to the
sum of (1) 90% of our "REIT taxable income" and (2) 90% of our after tax net
income, if any, from foreclosure property, minus (3) the sum of certain items
of noncash income. In general, "REIT taxable income" means taxable ordinary
income without regard to the dividends paid deduction. In addition, if we
dispose of any asset within 10 years of acquiring it from a taxable C
corporation in a tax free reorganization or any other similar carry over basis
transaction, we will be required, under Treasury regulations not yet
promulgated, to distribute at least 90% of the after-tax built-in gain, if any,
recognized on the disposition of the asset.
28
We are required to distribute income in the taxable year which it is
earned, or in the following taxable year before we timely file our tax return
if such dividend distributions are declared and paid on or before our first
regular dividend payment. Except as provided in "--Taxation of Taxable U.S.
Stockholders" below, these distributions are taxable to holders of common stock
in the year in which paid, even though these distributions relate to our prior
year for purposes of our 95% distribution requirement. To the extent that we do
not distribute all of our net capital gain or distribute at least 95%, but less
than 100% or our "REIT taxable income," we will be subject to tax at regular
corporate tax rates.
From time to time we may not have sufficient cash or other liquid assets
to meet the above distribution requirements due to timing differences between
the actual receipt of cash and payment of expenses, and the inclusion of income
and deduction of expenses in arriving at our taxable income. If these timing
differences occur, in order to meet the REIT distribution requirements, we may
need to arrange for short-term, or possibly long-term, borrowings, or to pay
dividends in the form of taxable stock dividends.
Under certain circumstances, we may be able to rectify a failure to meet
a distribution requirement for a year by paying "deficiency dividends" to our
stockholders in a later year, which may be included in our deduction for
dividends paid for the earlier year. Thus, we may be able to avoid being
subject to tax on amounts distributed as deficiency dividends. We will be
required, however, to pay interest based upon the amount of any deduction
claimed for deficiency dividends. In addition, we will be subject to a 4%
excise tax on the excess of the required distribution over the amounts actually
distributed if we should fail to distribute each year at least the sum of 85%
of our ordinary income for the year, 95% of our capital gain income for the
year, and any undistributed taxable income from prior periods.
RECORD KEEPING REQUIREMENTS
We are required to maintain records and request on an annual basis
information from specified stockholders. This requirement is designed to
disclose the actual ownership of our outstanding stock.
FAILURE TO QUALIFY
If we fail to qualify for taxation as a REIT in any taxable year, and the
relief provisions of the Code described above do not apply, we will be subject
to tax, including any applicable alternative minimum tax, and possibly
increased state and local taxes, on our taxable income at regular corporate
rates. Such taxation would reduce the cash available for distribution by us to
our stockholders. Distributions to stockholders in any year in which we fail to
qualify as a REIT will not be deductible by us and we will not be required to
distribute any amounts to our stockholders. If we fail to qualify as a REIT,
distributions to our stockholders will be subject to tax as ordinary income to
the extent of our current and accumulated earnings and profits and, subject to
certain limitations of the Code, corporate stockholders may be eligible for the
dividends received deduction. Unless entitled to relief under specific
statutory provisions, we would also be disqualified from taxation as a REIT for
the four taxable years following the year during which we lost our
qualification. It is not possible to state whether in all circumstances we
would be entitled to statutory relief.
TAXATION OF TAXABLE U.S. STOCKHOLDERS
When we use the term "U.S. stockholders," we mean a holder of shares of
our stock who is, for United States federal income tax purposes:
- a citizen or resident of the United States;
- a corporation, or other entity taxable as a corporation and created or
organized in or under the laws of the United States or of any state
thereof or in the District of Columbia, unless Treasury regulations
provide otherwise;
29
- an estate the income of which is subject to United States federal income
taxation regardless of its source; or
- a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons whom
have the authority to control all substantial decisions of the trust.
DISTRIBUTIONS GENERALLY
Distributions out of our current or accumulated earnings and profits,
other than capital gain dividends will be taxable to our U.S. stockholders as
ordinary income. Provided we qualify as a REIT, our dividends will not be
eligible for the dividends received deduction generally available to U.S.
stockholders that are corporations.
To the extent that we make distributions in excess of our current and
accumulated earnings and profits, our distributions will be treated as a tax-
free return of capital to each U.S. stockholder, and will reduce the adjusted
tax basis which each U.S. stockholder has in its shares of stock by the amount
of the distribution, but not below zero. Distributions in excess of a U.S.
stockholder's adjusted tax basis in its shares will be taxable as capital gain,
provided that the shares have been held as capital assets, and will be taxable
as long-term capital gain if the shares have been held for more than one year.
Dividends we declare in October, November, or December of any year and pay to a
stockholder of record on a specified date in any of those months will be
treated as both paid by us and received by the stockholder on December 31 of
that year, provided we actually pay the dividend in January of the following
year. Stockholders may not include in their own income tax returns any of our
net operating losses or capital losses.
CAPITAL GAIN DISTRIBUTIONS
Distributions designated as net capital gain dividends will be taxable to
our U.S. stockholders as capital gain income to the extent that they do not
exceed our actual net capital gain for the taxable year, without regard to the
period for which a U.S. stockholder has held his shares. Such capital gain
income will be taxable to non-corporate U.S. stockholders at a 20% or 25% rate
based on the characteristics of the asset we sold that produced the gain. U.S.
stockholders that are corporations may be required to treat up to 20% of
certain capital gain dividends as ordinary income.
RETENTION OF NET CAPITAL GAINS
We may elect to retain, rather than distribute as a capital gain
dividend, our net capital gains. If we make this election, we would pay tax on
such retained capital gains. In such a case, our stockholders would generally:
- include their proportionate share of our undistributed net capital gains
in their taxable income;
- receive a credit for their proportionate share of the tax paid by us;
and
- increase the adjusted basis of their stock by the difference between the
amount of their capital gain and their share of the tax paid by us;
PASSIVE ACTIVITY LOSSES AND INVESTMENT INTEREST LIMITATIONS
Distributions we make, and gain arising from the sale or exchange by a
U.S. stockholder of our shares, will not be treated as passive activity income.
As a result, U.S. stockholders will not be able to apply any "passive losses"
against income or gain relating to our stock. Distributions we make, to the
extent they do not constitute a return of capital, generally will be treated as
investment income for purposes of computing the investment interest limitation.
30
DISPOSITIONS OF STOCK
If you are a U.S. stockholder and you sell or dispose of your shares of
stock, you will recognize gain or loss for Federal income tax purposes in an
amount equal to the difference between the amount of cash and the fair market
value of any property you receive on the sale or other disposition and your
adjusted tax basis in the shares of stock. This gain or loss will be capital
gain or loss if you have held the stock as a capital asset, and will be long-
term capital gain or loss if you have held the stock for more than one year. In
general, if you are a U.S. stockholder and you recognize loss upon the sale or
other disposition of stock that you have held for six months or less, the loss
you recognize will be treated as a long-term capital loss to the extent you
received distributions from us which were required to be treated as long-term
capital gains.
BACKUP WITHHOLDING AND INFORMATION REPORTING
We report to our U.S. stockholders and the Internal Revenue Service the
amount of dividends paid during each calendar year, and the amount of any tax
withheld. Under the backup withholding rules, a stockholder may be subject to
backup withholding with respect to dividends paid unless the holder is a
corporation or comes within other exempt categories and, when required,
demonstrates this fact, or provides a taxpayer identification number or social
security number, certifies as to no loss of exemption from backup withholding,
and otherwise complies with applicable requirements of the backup withholding
rules. A U.S. stockholder that does not provide us with his correct taxpayer
identification number or social security number may also be subject to
penalties imposed by the Internal Revenue Service. Backup withholding is not an
additional tax. Any amount paid as backup withholding will be creditable
against the stockholder's income tax liability. In addition, we may be required
to withhold a portion of capital gain distributions to any stockholders who
fail to certify their non-foreign status.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
The Internal Revenue Service has ruled that amounts distributed as
dividends by a REIT do not constitute unrelated business taxable income when
received by a tax-exempt entity. Based on that ruling, provided that a tax-
exempt stockholder, has not held its shares as "debt financed property" within
the meaning of the Code and the shares are not otherwise used in a unrelated
trade or business, dividend income on our stock and income from the sale of our
stock should not be unrelated business taxable income to a tax-exempt
stockholder. Generally, debt financed property is property, the acquisition or
holding of which was financed through a borrowing by the tax-exempt
stockholder.
For tax-exempt stockholders which are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans exempt from Federal income taxation under Sections
501(c)(7), (c)(9), (c)(17) and (c)(20) of the Code, respectively, income from
an investment in our shares will constitute unrelated business taxable income
unless the organization is able to properly claim a deduction for amounts set
aside or placed in reserve for certain purposes so as to offset the income
generated by its investment in our shares. These prospective investors should
consult their tax advisors concerning these "set aside" and reserve
requirements.
Notwithstanding the above, however, a portion of the dividends paid by a
"pension-held REIT" may be treated as unrelated business taxable income as to
any pension trust which:
- is described in Section 401(a) of the Code;
- is tax-exempt under Section 501(a) of the Code; and
- holds more than 10%, by value, of the equity interests in the REIT.
31
Tax-exempt pension funds that are described in Section 401(a) of the Code
are referred to below as "qualified trusts."
A REIT is a "pension held REIT" if:
- it would not have qualified as a REIT but for the fact that Section
856(h)(3) of the Code provides that stock owned by qualified trust shall
be treated, for purposes of the 5/50 Rule, as owned by the beneficiaries
of the trust, rather than by the trust itself; and
- either at least one qualified trust holds more than 25%, by value, of
the interests in the REIT, or one or more qualified trusts, each of
which owns more than 10%, by value, of the interests in the REIT, holds
in the aggregate more than 50%, by value, of the interests in the REIT.
The percentage of any REIT dividend treated as unrelated business taxable
income is equal to the ratio of:
- the gross income from the unrelated business earned by the REIT, less
direct expenses relating to this gross income, treating the REIT as if
it were a qualified trust and therefore subject to tax on unrelated
business taxable income, to
- the total gross income of the REIT less direct expenses relating to this
gross income.
A de minimis exception applies where the percentage is less than 5% for
any year. As a result of the limitations on the transfer and ownership of stock
contained in the charter, we do not expect to be classified as a "pension-held
REIT."
TAXATION OF NON-U.S. STOCKHOLDERS
The rules governing Federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
stockholders (collectively, "non-U.S. stockholders") are complex and no attempt
will be made herein to provide more than a summary of such rules.
PROSPECTIVE NON-U.S. STOCKHOLDERS SHOULD CONSULT THEIR TAX ADVISORS TO
DETERMINE THE IMPACT OF FOREIGN, FEDERAL, STATE, AND LOCAL INCOME TAX LAWS WITH
REGARD TO AN INVESTMENT IN OUR SECURITIES AND OF OUR ELECTION TO BE TAXED AS A
REAL ESTATE INVESTMENT TRUST INCLUDING ANY REPORTING REQUIREMENTS.
Distributions to non-U.S. stockholders that are not attributable to gain
from sales or exchanges by us of U.S. real property interests and are not
designated by us as capital gain dividends or retained capital gains will be
treated as dividends of ordinary income to the extent that they are made out of
our current or accumulated earnings and profits. Such distributions will
generally be subject to a withholding tax equal to 30% of the distribution
unless an applicable tax treaty reduces or eliminates that tax. However, if
income from an investment in our stock is treated as effectively connected with
the non-U.S. stockholder's conduct of a U.S. trade or business, the non-U.S.
stockholder generally will be subject to Federal income tax at graduated rates,
in the same manner as U.S. stockholders are taxed with respect to such
distributions (and also may be subject to the 30% branch profits tax in the
case of a non-U.S. stockholder that is a corporation). We expect to withhold
U.S. income tax at the rate of 30% on the gross amount of any distributions
made to a non-U.S. stockholder unless (i) a lower treaty rate applies and any
required form, such as Form W-8BEN, evidencing eligibility for that reduced
rate is filed by the non-U.S. stockholder with us or (ii) the non-U.S.
stockholder files a Form W-8ECI with us claiming that the distribution is
effectively connected income.
32
Any portion of the dividends paid to non-U.S. stockholders that is
treated as excess inclusion income from a real estate mortgage investment
conduit will not be eligible for exemption from the 30% withholding tax or a
reduced treaty rate. In addition, if Treasury regulations are issued allocating
our excess inclusion income from non-real estate mortgage investment conduits
among our stockholders, some percentage of our dividends would not be eligible
for exemption from the 30% withholding tax or a reduced treaty withholding tax
rate in the hands of non-U.S. stockholders.
Distributions in excess of our current and accumulated earnings and
profits will not be taxable to a stockholder to the extent that such
distributions do not exceed the adjusted basis of the stockholder's stock, but
rather will reduce the adjusted basis of such shares. To the extent that
distributions in excess of current and accumulated earnings and profits exceed
the adjusted basis of a non-U.S. stockholder's stock, such distributions will
give rise to tax liability if the non-U.S. stockholder would otherwise be
subject to tax on any gain from the sale or disposition of its stock, as
described below. Because it generally cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the entire amount of any
distribution normally will be subject to withholding at the same rate as a
dividend. However, amounts so withheld are refundable to the extent it is
subsequently determined that such distribution was, in fact, in excess of our
current and accumulated earnings and profits. We are also required to withhold
10% of any distribution in excess of our current and accumulated earnings and
profits.
For any year in which we qualify as a REIT, distributions that are
attributable to gain from sales or exchanges of a U.S. real property interest,
which includes certain interests in real property, but generally does not
include mortgage loans or mortgage backed securities, will be taxed to a Non-
U.S. stockholder under the provisions of the Foreign Investment in Real
Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA, distributions attributable
to gain from sales of U.S. real property interests are taxed to a non-U.S.
stockholder as if such gain were effectively connected with a U.S. business.
Non-U.S. stockholders thus would be taxed at the normal capital gain rates
applicable to U.S. stockholders (subject to applicable alternative minimum tax
and a special alternative minimum tax in the case of nonresident alien
individuals). Distributions subject to FIRPTA also may be subject to the 30%
branch profits tax in the hands of a non-U.S. corporate stockholder. We are
required to withhold 35% of any distribution that is or can be designated by us
as a U.S. real property capital gains dividend. The amount withheld is
creditable against the non-U.S. stockholder's FIRPTA tax liability.
Gain recognized by a non-U.S. stockholder upon a sale of our stock
generally will not be taxed under FIRPTA if we are a "domestically controlled
REIT," which is a REIT in which at all times during a specified testing period
less than 50% in value of the stock was held directly or indirectly by non-U.S.
persons. Because our stock is publicly traded, no assurance can be given that
we are or will remain a "domestically controlled REIT." In addition, a non-U.S.
stockholder that owns, actually or constructively, 5% or less of a class of our
stock throughout a specified testing period will not recognize taxable gain on
the sale of his stock under FIRPTA if the shares are traded on an established
securities market.
Gain not subject to FIRPTA will be taxable to a non-U.S. stockholder if
(i) the non-U.S. stockholder's investment in the stock is effectively connected
with a U.S. trade or business, in which case the non-U.S. stockholder will be
subject to the same treatment as U.S. stockholders with respect to such gain,
or (ii) the non-U.S. stockholder is a nonresident alien individual who was
present in the U.S. for 183 days or more during the taxable year and other
conditions are met, in which case the nonresident alien individual will be
subject to a 30% tax on the individual's capital gains. If the gain on the sale
of the stock were to be subject to taxation under FIRPTA, the non-U.S.
stockholder would be subject to the same treatment as U.S. stockholders with
respect to such gain (subject to applicable alternative minimum tax, a special
alternative minimum tax in the case of nonresident alien individuals, and the
possible application of the 30% branch profits tax in the case of non-U.S.
corporations). A similar rule will apply to capital gain dividends to which
FIRPTA does not apply.
33
WITHHOLDING TAX AND INFORMATION REPORTING ON DISPOSAL OF REIT STOCK
The payment of proceeds from the disposition of common stock to or
through a U.S. office of a broker will be subject to information reporting and
backup withholding, unless the beneficial owner furnishes to the broker the
appropriate documentation upon which the beneficial owner certifies, under
penalties of perjury, among other things, its status as a non-U.S. stockholder
or otherwise establishes an exemption and provided the broker does not have
actual knowledge or reason to know that the beneficial owner is a U.S.
stockholder.
The payment of proceeds from the disposition of common stock to or
through a non-U.S. office of a broker generally will not be subject to backup
withholding and information reporting, except as noted below.
In the case of proceeds from a disposition of common stock paid to or
through a non-U.S. office of a broker that is:
- a U.S. person;
- a "controlled foreign corporation" for U.S. federal income tax purposes;
or
- a foreign person 50% or more of whose gross income from a specified
period is effectively connected with a U.S. trade or business;
information reporting, but not backup withholding, will apply unless the broker
has documentary evidence in its files that the owner is a non-U.S. stockholder
and other conditions are satisfied, or the beneficial owner otherwise
establishes an exemption, and the broker has no actual knowledge to the
contrary.
The sale of common stock outside of the U.S. through a non-U.S. broker
will also be subject to information reporting if the broker is a foreign
partnership and at any time during its tax year:
- one or more of its partners are United States persons, as defined for
U.S. federal income tax purposes, who in the aggregate hold more than
50% of the income or capital interests in the partnership; or
- the foreign partnership is engaged in a U.S. trade or business.
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules from a payment to a non-U.S. stockholder can be
refunded or credited against the non-U.S. stockholder's U.S. federal income tax
liability, if any, provided that the required information is furnished to the
Internal Revenue Service in a timely manner.
Each prospective holder of common stock should consult that holder's own
tax adviser with respect to the information and backup withholding
requirements.
STATE, LOCAL AND FOREIGN TAXATION
We may be required to pay state, local and foreign taxes in various
state, local and foreign jurisdictions, including those in which we transact
business or make investments, and our stockholders may be required to pay
state, local and foreign taxes in various state, local and foreign
jurisdictions, including those in which they reside. Our state, local and
foreign tax treatment may not conform to the Federal income tax consequences
summarized above. In addition, your state, local and foreign tax treatment may
not conform to the Federal income tax consequences summarized above.
Consequently, you should consult your tax advisor regarding the effect of
state, local and foreign tax laws on an investment in our securities.
34
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS.
The rules dealing with Federal income taxation are constantly under
review by persons involved in the legislative process and by the Internal
Revenue Service and the U.S. Treasury Department. Changes to the tax law, which
may have retroactive application, could adversely affect us and our investors.
It cannot be predicted whether, when, in what forms, or with what effective
dates, the tax law applicable to us or our investors will be changed.
PLAN OF DISTRIBUTION
We may sell common stock, preferred stock or any series of debt
securities being offered by this prospectus in one or more of the following
ways from time to time:
- to underwriters for resale to the public or to institutional investors;
- directly to institutional investors; or
- through agents to the public or to institutional investors.
Underwriters from time to time may include UBS Warburg LLC.
The prospectus supplements will describe the terms of the offering of the
securities, including the name or names of any underwriters or agents, the
purchase price of such securities and the proceeds to us from such sale, any
underwriting discounts or agency fees and other item's constituting
underwriters' or agents' compensation, any initial public offering price, any
discounts or concessions allowed or reallowed or paid to dealers and any
securities exchanges on which such securities may be listed.
If underwriters are used in the sale, the securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or prices, which may be changed, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices.
Unless a prospectus supplement states otherwise, the obligations of the
underwriters to purchase any series of securities will be subject to certain
conditions precedent and the underwriters will be obligated to purchase all of
such series of securities, if any are purchased.
Underwriters and agents may be entitled under agreements entered into
with us to indemnification by us against certain civil liabilities, including
liabilities under the Securities Act of 1933, or to contribution with respect
to payments which the underwriters or agents may be required to make.
Underwriters and agents may be customers of, engage in transactions with, or
perform services for us and our affiliates in the ordinary course of business.
Each series of securities will be a new issue of securities and will have
no established trading market other than the common stock which is listed on
the NYSE. Any common stock sold pursuant to a prospectus supplement will be
listed on the NYSE, subject to official notice of issuance. Any underwriters to
whom we sell securities for public offering and sale may make a market in the
securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. The securities, other
than the common stock, may or may not be listed on a national securities
exchange.
35
LEGAL OPINIONS
The validity of the shares of common stock offered hereby will be passed
upon for us by Miles & Stockbridge, a Professional Corporation, Baltimore,
Maryland. Certain matters relating to federal income tax considerations will be
passed upon for us by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from Anthracite Capital, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 2000 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
36
(LOGO)