PRICING SUPPLEMENT NO. 9A Rule 424(b)(5)
DATED: May 11, 2005 File No. 333-121744
(To Prospectus dated February 2, 2005,
and Prospectus Supplement dated February 2, 2005)
$12,410,781,162
THE BEAR STEARNS COMPANIES INC.
Medium-Term Notes, Series B
Principal Amount: $10,000,000 Floating Rate Notes |x| Book Entry Notes |x|
Original Issue Date: 5/26/2005 Fixed Rate Notes | | Certificated Notes | |
Maturity Date: 5/26/2020 CUSIP No.: 073928L27
Option to Extend Maturity: No |x|
Yes | | Final Maturity Date:
Minimum Denominations: $100,000 increased in multiples of $10,000
Optional Optional
Redeemable On Redemption Price(s) Repayment Date(s) Repayment Price(s)
------------- ------------------- ----------------- ------------------
* * N/A N/A
Applicable Only to Fixed Rate Notes:
------------------------------------
Interest Rate:
Interest Payment Dates:
Applicable Only to Floating Rate Notes:
---------------------------------------
Interest Rate Basis: Maximum Interest Rate: N/A
| | Commercial Paper Rate Minimum Interest Rate: 0.00%
| | Federal Funds Effective Rate
| | Federal Funds Open Rate Interest Reset Date(s): **
| | Treasury Rate Interest Reset Period: Quarterly
| | LIBOR Reuters Interest Payment Date(s): ***
| | LIBOR Telerate Interest Payment Period: Quarterly
| | Prime Rate
| | CMT Rate
|x| Other: See "Interest Rate" below
Index Maturity: N/A Interest Determination Date(s): Fifth Business Day prior
to but not including the applicable Interest Reset Date
Day Count Basis: 360-day year of twelve
30-day months
* Commencing August 26, 2005 and on each Interest Payment Date thereafter until
Maturity, the Notes may be called in whole at par at the option of the Company
on five New York Business Days' notice.
** Commencing August 26, 2005 and on each November 26th, February 26th, May 26th
and August 26th thereafter prior to Maturity. If any Interest Reset Date is not
a Business Day, then the Interest Reset Date will be postponed to the next
Business Day. If the next Business Day is in the next succeeding calendar month,
the Interest Reset Date will be the preceding Business Day (any such adjustment
being referred to as the "Modified Business Day Convention").
*** Commencing August 26, 2005 and on each November 26th, February 26th, May
26th and August 26th thereafter, including the Maturity Date.
If any Interest Payment Date, Maturity Date or redemption date is not a Business
Day, the related payment of principal, premium, if any, or interest will be
postponed to the next Business Day and no additional interest shall accrue for
the period from and after that Interest Payment Date, Maturity Date or
redemption date, as the case may be, to the next Business Day. If the next
Business Day is in the next calendar month, principal, premium, if any, or
interest will be paid on the preceding Business Day.
Business Day: Any day that is both a London Banking Day and a New York
Business Day.
London Banking Day: A day other than a Saturday or Sunday on which dealings
in deposits in U.S. dollars are transacted, or with
respect to any future date are expected to be
transacted, in the London interbank market.
New York Business Day: Any day that is not a Saturday or Sunday, and that, in
New York City, is not a legal holiday nor a day on which
banking institutions or trust companies in New York City
are authorized or obligated by law to close.
Interest Rate: USD Callable CMS Spread Principal Protected Range
Accrual Note.
The Calculation Agent will determine the Interest Rate
for each Interest Payment Period in accordance with the
following:
For each Interest Payment Period from the Original Issue
Date through May 25, 2010, the Interest Rate shall
equal:
n
7.00%x---
N
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For each Interest Payment Period from May 26, 2010
through May 25, 2015, the Interest Rate shall equal:
n
8.00%x---
N
For each Interest Payment Period from May 26, 2015 until
the Maturity Date, the Interest Rate shall equal:
n
12.00%x---
N
Where n equals the number of days in the respective
Interest Payment Period in which the Accrual Provision
is satisfied, and N equals the actual number of days in
the respective Interest Payment Period. See "Accrual
Provision" below.
Accrual Provision: Interest will accrue (at the rate per annum under
Interest Rate above for each Interest Payment Period) on
each day on which the 30-Year CMS Rate minus the 2-Year
CMS Rate for the relevant Accrual Determination Date is
equal to or greater than 0% (such calculation referred
to as the "Accrual Provision"). If, however, the 30-Year
CMS Rate minus the 2-Year CMS Rate for any Accrual
Determination Date is less than 0%, then no interest
will accrue for any day relating to such Accrual
Determination Date. No determination as to satisfaction
of the Accrual Provision will be made with respect to
the Exclusion Period (as defined below). The
determination with respect to each day of an Exclusion
Period will be deemed to have been made on the last New
York Business Day prior to such Exclusion Period. See
"Risk Factors" below.
Accrual Determination A determination as to whether the Accrual Provision has
Date: been satisfied will be made on each Accrual
Determination Date. Each New York Business Day during an
Interest Payment Period will be an Accrual Determination
Date, provided that such New York Business Day is not
within the Exclusion Period. For each day during an
Interest Payment Period that is not a New York Business
Day and not within the Exclusion Period, the Accrual
Determination Date will be the preceding New York
Business Day. The Exclusion Period means the period
beginning on the fifth New York Business Day prior to
but not including the last day of the current Interest
Payment Period.
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30-Year CMS Rate: The rate in effect for each Interest Payment Period will
be the rate that appears on Reuters page ISDA FIX1 under
the heading "30YR" at 11:00 a.m., New York City time on
the Interest Determination Date for that Interest
Payment Period. If such rate does not appear on Reuters
page ISDA FIX1 on such date, the rate for such date
shall be determined as if the parties had specified
"USD-CMS-Reference Banks" as the applicable rate.
2-Year CMS Rate: The rate in effect for each Interest Payment Period will
be the rate that appears on Reuters page ISDA FIX1 under
the heading "2YR" at 11:00 a.m., New York City time on
the Interest Determination Date for that Interest
Payment Period. If such rate does not appear on Reuters
page ISDA FIX1 on such date, the rate for such date
shall be determined as if the parties had specified
"USD-CMS-Reference Banks" as the applicable rate.
USD-CMS-Reference The rate determined on the basis of the mid-market
Banks: semi-annual swap rate quotations provided by the
Reference Banks at approximately 11:00 a.m., New York
City time on any Interest Determination Date; and for
this purpose, the semi-annual swap rate means the mean
of the bid and offered rates for the semi-annual fixed
leg, calculated on a 30/360 day count basis, of a
fixed-for-floating U.S. Dollar interest rate swap
transaction with a term equal to the Designated Maturity
commencing on that date and in a Representative Amount
with an acknowledged dealer of good credit in the swap
market, where the floating leg, calculated on an
actual/360 day count basis, is equivalent to
USD-LIBOR-BBA with a designated maturity of three
months. The rate for that Interest Determination Date
will be the arithmetic mean of the quotations,
eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation
(or, in the event of equality, one of the lowest).
Reference Banks: The five leading swap dealers in the New York City
interbank market selected by the Calculation Agent for
the purposes of providing quotations as provided above.
Designated Maturity: Either 30 years or 2 years, as the case may be.
Representative Amount: The amount that is representative for a single
transaction in the relevant market at the relevant time.
Calculation Agent: Bear, Stearns & Co. Inc.
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RISK FACTORS
The Notes are subject to special considerations. An investment in the
Notes entails risks that are not associated with an investment in conventional
floating-rate or fixed-rate debt securities. Prospective purchasers of the Notes
should understand the risks of investing in the Notes and should reach an
investment decision only after careful consideration, with their financial and
legal advisers, of the suitability of the Notes in light of their particular
financial circumstances, the following risk factors and the other information
set forth in this pricing supplement and the accompanying prospectus supplement
and prospectus. See "Risk Factors" generally in the Prospectus Supplement.
Interest Rate Risk. Investors should consider the risk that the 30-Year
CMS Rate minus the 2-Year CMS Rate, determined on a daily basis, may be less
than 0% on one or more New York Business Days during the applicable Interest
Payment Period, in which case the Notes will not accrue interest for any day
relating to an Accrual Determination Date on which the Accrual Provision is not
satisfied during the Interest Payment Period. During the period from April 28,
2000 through June 8, 2000, the difference of the 30-Year CMS Rate minus the
2-Year CMS Rate was, at times, less than zero (as determined by reference to the
last trade data reported by Bloomberg L.P.).
Although the Interest Rate on the Notes is determined by reference to the
difference between the 30-Year CMS Rate and the 2-Year CMS Rate, the Notes do
not actually pay that difference. The maximum Interest Rate for any Interest
Payment Period will be equal to the interest rate factor for that Interest
Payment Period (7%, 8% or 12%, as applicable). In addition, no determination as
to satisfaction of the Accrual Provision will be made with respect to the
Exclusion Period. The determination with respect to each day of an Exclusion
Period will be deemed to have been made on the last New York Business Day prior
to such Exclusion Period, regardless of what the actual differences are between
the 30-Year CMS Rate and the 2-Year CMS Rate for each of the days in that
Exclusion Period or whether the Accrual Provision would have otherwise been
satisfied if actually tested in that period. As a result, the Interest Rate
determination for any Interest Payment Period may not directly correlate to the
actual spread between the 30-Year CMS Rate and the 2-Year CMS Rate on each of
the New York Business Days in that Interest Payment Period.
The following table, showing the historical performance of the 30-Year CMS
Rate, 2-Year CMS Rate, 30-Year CMS Rate minus the 2-Year CMS Rate and the actual
number of days during the respective Interest Payment Periods corresponding to
each Interest Payment Date in which the Accrual Provision is not satisfied
(i.e., the difference between the 30-Year CMS Rate and the 2-Year CMS Rate is
less than 0%), should not be taken as an indication of the future performance of
this calculation during the term of the Notes. It is impossible to predict
whether the difference between the 30-Year CMS Rate and the 2-Year CMS Rate will
fall or rise. This calculation depends on and is influenced by a number of
complex and interrelated factors, including political, economic, financial and
other factors over which the Company has no control.
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Actual #
of Days
When 30-Year
CMS minus
Interest 30-Year CMS 2-Year CMS Difference 2-Year CMS
Payment Date Rate (%) Rate (%) 30Y-2Y (%)* is < 0*
------------ -------- -------- ----------- -------
August 26, 1994 8.0300 6.3650 1.6650 --
November 26, 1994 8.4300 7.4700 0.9600 0
February 26, 1995 7.9900 7.0950 0.8950 0
May 26, 1995 7.1500 6.1150 1.0350 0
August 26, 1995 7.0700 6.0150 1.0550 0
November 26, 1995 6.6200 5.6250 0.9950 0
February 26, 1996 6.7800 5.3150 1.4650 0
May 26, 1996 7.2500 6.2300 1.0200 0
August 26, 1996 7.3700 6.3450 1.0250 0
November 26, 1996 6.7800 5.8050 0.9750 0
February 26, 1997 7.1400 6.2250 0.9150 0
May 26, 1997 7.3400 6.4850 0.8550 0
August 26, 1997 6.9900 6.2450 0.7450 0
November 26, 1997 6.4300 6.0850 0.3450 0
February 26, 1998 6.3200 5.8750 0.4450 0
May 26, 1998 6.2300 5.9300 0.3000 0
August 26, 1998 6.2000 5.6150 0.5850 0
November 26, 1998 5.8300 5.2000 0.6300 0
February 26, 1999 6.2200 5.6400 0.5800 0
May 26, 1999 6.4850 5.8000 0.6850 0
August 26, 1999 6.9600 6.1800 0.7800 0
November 26, 1999 7.1200 6.5100 0.6100 0
February 26, 2000 7.3990 6.9700 0.4290 0
May 26, 2000 7.6630 7.5165 0.1465 2
August 26, 2000 6.9750 6.9400 0.0350 2
November 26, 2000 6.8380 6.5490 0.2890 0
February 26, 2001 6.2990 5.1120 1.1870 0
May 26, 2001 6.5930 4.8600 1.7330 0
August 26, 2001 6.1340 4.2760 1.8580 0
November 26, 2001 6.0600 3.6550 2.4050 0
February 26, 2002 6.0700 3.3700 2.7000 0
May 26, 2002 6.1700 3.6600 2.5100 0
August 26, 2002 5.4205 2.5200 2.9005 0
November 26, 2002 5.3575 2.3250 3.0325 0
February 26, 2003 5.0560 1.8150 3.2410 0
May 26, 2003 4.5700 1.5350 3.0350 0
August 26, 2003 5.6860 2.2350 3.4510 0
November 26, 2003 5.3800 2.2650 3.1150 0
February 26, 2004 5.2325 1.9950 3.2375 0
May 26, 2004 5.7510 2.8840 2.8670 0
August 26, 2004 5.3595 2.8150 2.5445 0
November 26, 2004 5.2490 3.3920 1.8570 0
February 26, 2005 5.0590 3.8800 1.1790 0
* Calculated based upon consideration of the 30-Year CMS Rate minus the
2-Year CMS Rate determined from the last trade data as reported by
Bloomberg L.P.
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The historical experience of the 30-Year CMS Rate minus the 2-Year CMS
Rate should not be taken as an indication of the future performance of the
30-Year CMS Rate minus the 2-Year CMS Rate during the term of the Notes.
Fluctuations in the level of the 30-Year CMS Rate and the 2-Year CMS Rate make
the Notes' effective interest rate difficult to predict and can result in
effective interest rates to investors that are lower than anticipated. In
addition, historical interest rates are not necessarily indicative of future
interest rates. Fluctuations in interest rates and interest rate trends that
have occurred in the past are not necessarily indicative of fluctuations that
may occur in the future, which may be wider or narrower than those that have
occurred historically.
Call Risk. Investors should consider that it is more likely that we will
redeem the Notes prior to the Maturity Date if the Interest Rate results in an
interest payment greater than instruments of comparable maturity and credit
rating trading in the market.
Liquidity Risk. The Notes will not be listed on any securities exchange
and we do not expect a trading market to develop, which may affect the price
that you receive for your Notes upon any sale prior to Maturity. You should be
aware that we cannot ensure that a secondary market in the Notes will develop
and, if such market were to develop, it may not be liquid. If you sell your
Notes prior to Maturity, you may receive less than the amount you originally
invested. The Calculation Agent has advised us that it intends under ordinary
market conditions to indicate prices for the Notes on request. However, we
cannot guarantee that bids for outstanding Notes will be made in the future, nor
can we predict the price at which those bids will be made. The secondary market
for, and the market value of, the Notes will be affected by a number of factors
independent of our creditworthiness, including the level and direction of
interest rates, the Accrual Provisions applicable to the Notes, the anticipated
level and potential volatility of the 30-Year CMS Rate and the 2-Year CMS Rate,
the method of calculating the 30-Year CMS Rate and the 2-Year CMS Rate, the time
remaining to Maturity of the Notes, our right to redeem the Notes, the aggregate
principal amount of the Notes, the availability of comparable instruments and
the cost to us of unwinding any related hedging activity or any funding
arrangement.
ILLUSTRATIVE EXAMPLES
The following are illustrative examples demonstrating the hypothetical
Accrual Provision and Interest Rate during an Interest Payment Period based on
the following assumptions:
o The hypothetical Interest Payment Period shall be May 26, 2006
through August 25, 2006, representing 92 actual days (i.e., N = 92).
o Each example below will specify the number of days in the Interest
Payment Period in which the Accrual Provision is satisfied (i.e.,
the value of n).
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Example 1.
For each day during the Interest Payment Period, the 30-Year CMS Rate
minus the 2-Year CMS Rate is always greater than or equal to 0%. Therefore, the
Accrual Provision is satisfied for each of the 92 days in the Interest Payment
Period. The Interest Rate for this Interest Payment Period is 7.00%, calculated
as follows:
n
= 7.00%x---
N
92
= 7.00%x----
92
= 7.00%
Example 2.
There were 82 days during the Interest Payment Period in which the 30-Year
CMS Rate minus the 2-Year CMS Rate was greater than or equal to 0%. The Accrual
Provision is satisfied for 82 days in the Interest Payment Period and the
Interest Rate for this Interest Payment Period is 6.24%, calculated as follows:
n
= 7.00%x---
N
82
= 7.00%x----
92
= 6.24%
Example 3.
There were no days during the Interest Payment Period in which the 30-Year
CMS Rate minus the 2-Year CMS Rate was greater than or equal to 0%. The Accrual
Provision is not satisfied for any day in the Interest Payment Period and the
Interest Rate for this Interest Payment Period is 0.00%, calculated as follows:
n
= 7.00%x---
N
0
= 7.00%x----
92
= 0.00%
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CERTAIN US FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain US federal income tax
consequences of the purchase, beneficial ownership and disposition of Notes.
This summary deals only with a beneficial owner of a Note that is:
o an individual who is a citizen or resident of the United States for
US federal income tax purposes;
o a corporation (or other entity that is treated as a corporation for
US federal tax purposes) that is created or organized in or under
the laws of the United States or any State thereof (including the
District of Columbia);
o an estate whose income is subject to US federal income taxation
regardless of its source; or
o a trust if a court within the United States is able to exercise
primary supervision over its administration, and one or more United
States persons have the authority to control all of its substantial
decisions (each, a "US Holder").
If a partnership (or other entity that is treated as a partnership for US
federal tax purposes) is a beneficial owner of Notes, the treatment of a partner
in the partnership will generally depend upon the status of the partner and upon
the activities of the partnership. A beneficial owner of Notes that is a
partnership, and partners in such a partnership, should consult their tax
advisors about the US federal income tax consequences of holding and disposing
of the Notes.
An individual may, subject to certain exceptions, be deemed to be a
resident of the United States for US federal income tax purposes by reason of
being present in the United States for at least 31 days in the calendar year and
for an aggregate of at least 183 days during a three-year period ending in the
current calendar year (counting for such purposes all of the days present in the
current year, one-third of the days present in the immediately preceding year,
and one-sixth of the days present in the second preceding year).
This discussion is based on interpretations of the Internal Revenue Code
of 1986, as amended (the "Code"), regulations issued thereunder, and rulings and
decisions currently in effect (or in some cases proposed), all of which are
subject to change. Any such change may be applied retroactively and may
adversely affect the federal income tax consequences described herein. This
summary addresses only US Holders that purchase Notes at initial issuance and
beneficially own such Notes as capital assets and not as part of a "straddle,"
"hedge," "synthetic security" or a "conversion transaction" for federal income
tax purposes, or as part of some other integrated investment. This summary does
not discuss all of the tax consequences that may be relevant to particular
investors or to investors subject to special treatment under the federal income
tax laws (such as S corporations, banks, thrifts, other financial institutions,
insurance companies, mutual funds, small business investment companies,
tax-exempt organizations, retirement plans, real estate investment trusts,
regulated investment companies, securities dealers or brokers, traders in
securities electing mark to market treatment, investors whose functional
currency is not the US dollar, persons subject to the alternative minimum tax,
and former citizens
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or residents of the United States), and this summary does not discuss the tax
consequences under the laws of any foreign, state or local taxing jurisdictions.
Accordingly, prospective investors are urged to consult their tax advisors with
respect to the federal, state and local tax consequences of investing in the
Notes, as well as any consequences arising under the laws of any other taxing
jurisdiction to which they may be subject.
PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR TAX ADVISORS AS TO
THE FEDERAL, STATE, LOCAL, AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF NOTES.
Federal Income Tax Treatment of US Holders
General
There are no statutory provisions, regulations, published rulings,
judicial decisions or other authorities addressing the federal income tax
treatment of debt instruments with terms that are substantially similar to the
Notes, and therefore the federal income tax treatment of the Notes is subject to
some uncertainty. As discussed below, we intend to take the position that May
25, 2010 is the maturity date of the Notes for federal income tax purposes.
However, this position is not free from doubt.
Treatment of the Notes
Under the Treasury regulations governing original issue discount on debt
instruments (the "OID Regulations"), for purposes of determining the yield and
maturity of a debt instrument, an issuer is generally deemed to exercise an
option or combination of options if the exercise would minimize the yield on the
debt instrument. Because the interest payable after May 25, 2010 is greater than
the interest payable from the Original Issue Date to May 25, 2010, computed as
if the Original Issue Date was the last day of a monthly interest payment
period, for purposes of OID Regulations we intend to take the position that the
Company should be deemed to elect on May 25, 2010, to call the Notes and
therefore that May 25, 2010 is the maturity date of the Notes for federal income
tax purposes.
The remainder of this summary assumes that May 25, 2010 is the maturity
date of the Notes.
Interest
A US Holder will be required to include in gross income payments of stated
interest on the Notes when accrued or received, in accordance with its usual
method of tax accounting, as ordinary interest income.
Sale, Exchange, Redemption, Repayment or Other Disposition of the Notes
In addition, upon a sale, exchange, redemption, repayment or other
disposition of a Note, a US Holder would generally recognize capital gain or
loss equal to the difference between the amount realized on the sale, exchange,
redemption, repayment or other disposition (less any accrued and unpaid
interest, which will be taxable as such) and the US Holder's tax basis in the
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Note, which would generally equal the US Holder's cost of the Note reduced by
payments of principal on the Note. Such gain or loss will be long-term capital
gain or loss if the US Holder held the Note for more than one year at the time
of disposition. US Holders that are individuals are entitled to preferential
treatment for net long-term capital gains; however, the ability of US Holders to
offset capital losses against ordinary income is limited.
Possible Alternative Tax Treatments of an Investment in the Notes.
Because there are no statutory provisions, regulations, published rulings,
or judicial decisions addressing the treatment for federal income tax purposes
of securities with terms that are substantially the same as those of the Notes,
other treatments are possible. For example, it is possible that the IRS could
assert that the Notes are subject to special rules governing "contingent payment
debt instruments." If the IRS were successful in this assertion, US Holders may
be required to accrue original issue discount income, subject to adjustments, at
a "comparable yield" on the issue price of the Notes and any gain recognized
with respect to the Notes generally would be treated as ordinary income. The
federal income tax treatment of contingent payment debt instruments is
summarized in the Prospectus Supplement dated February 2, 2005 under the caption
"Certain US Federal Income Tax Considerations - Contingent Payment Debt
Instruments." Each US Holder is urged to consult its tax advisors regarding its
tax treatment of the Notes.
Information Reporting and Backup Withholding
Information reporting will apply to certain payments on a Note (including
interest and OID) and proceeds of the sale of a Note held by a US Holder that is
not an exempt recipient (such as a corporation). Backup withholding may apply to
payments made to a US Holder if (a) the US Holder has failed to provide its
correct taxpayer identification number on IRS Form W-9, (b) we have been
notified by the IRS of an underreporting by the US Holder (underreporting
generally refers to a determination by the IRS that a payee has failed to
include in income on its tax return any reportable dividend and interest
payments required to be shown on a tax return for a taxable year) or (c) we have
been notified by the IRS that the tax identification number provided to the IRS
on an information return does not match IRS records or that the number was not
on the information return.
THE PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAIN OF THE TAX
IMPLICATIONS OF AN INVESTMENT IN NOTES. PROSPECTIVE PURCHASERS ARE URGED TO
CONSULT WITH THEIR OWN TAX ADVISORS PRIOR TO INVESTING TO DETERMINE THE TAX
IMPLICATIONS OF SUCH INVESTMENT IN LIGHT OF EACH SUCH INVESTOR'S PARTICULAR
CIRCUMSTANCES.
The distribution of the Notes will conform to the requirements set forth
in Rule 2720 of the NASD Conduct Rules.
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