The original issue discount on the new notes will have federal income tax
consequences for holders of those notes.
The new notes will bear original issue discount for federal income tax
purposes. Consequently, holders of the new notes generally will be required to
include amounts in gross income for federal income tax purposes in advance of
receipt of the cash payments to which the income is attributable. Please see
the "Certain United States Federal Income Tax Considerations" section of this
prospectus for a more detailed discussion of the federal income tax
consequences of the purchase, ownership and disposition of the New Discount
Issuers may not be able to deduct some of the interest on the new notes.
Although unlikely, it is possible that the new notes will constitute
"applicable high yield discount obligations" ("AHYDOs") for federal income tax
purposes. The new notes would be AHYDOs if:
. the yield to maturity on the new notes is equal to or greater than the
sum of the relevant applicable federal rate plus five percentage points
. the new notes bear significant original issue discount.
A debt instrument bears significant original issue discount for this purpose
if, as of the close of any accrual period ending more than five years after
issuance, the total amount of income includible by a holder with respect to the
debt instrument exceeds the sum of:
. interest paid to the holder (in cash or, generally, in property other
than debt instruments or stock of the issuer or a related person) and
. an amount equal to the issue price of the debt instrument multiplied by
its yield to maturity.
For purposes of this discussion, the date of issuance refers to the date of
issuance of the old notes.
Should the new notes be AHYDOs, the Issuers would not be entitled to claim a
deduction for original issue discount that accrued with respect to such new
notes until amounts attributable to such original issue discount were actually
paid. In addition, to the extent that the yield to maturity of the new notes
exceeded the sum of the relevant applicable federal rate plus six percentage
points (the "non-deductible portion"), any deduction that was attributable to
the non-deductible portion would be permanently disallowed.
Although the law is unclear in certain respects and the issue is therefore
not free from doubt, the new notes should not constitute AHYDOs because they
should not bear significant original issue discount because, by the close of
the first accrual period ending more than five years after issuance, the
Issuers are required by the terms of the new notes to pay, in cash, an amount
at least equal to the excess of all original issue discount accrued to that
date since the date of issuance of the old notes over an amount equal to one
year's simple uncompounded interest on the aggregate issue price of the old
notes at a rate per annum equal to the stated interest rate on the old notes;
thereafter, cash interest is required to be paid semiannually.
Bankruptcy claims by holders of the new notes against the Issuers may be
limited in amount.
If a bankruptcy case is commenced by or against any of the Issuers under
federal bankruptcy law after the issuance of the new notes, the claim of a
holder of the new notes with respect to the principal amount of those notes may
be limited to the sum of:
. the initial public offering price of the new notes, and
. that portion of the original issue discount which is not deemed to
constitute "unmatured interest" for purposes of federal bankruptcy law.
Any original issue discount that was not amortized as of any such bankruptcy
filing would constitute "unmatured interest."