This
preliminary pricing supplement relates to an effective registration
statement under the Securities Act of 1933, but is not complete
and may be
changed. This preliminary pricing supplement and the accompanying
prospectus supplement and prospectus are not an offer to sell,
or the
solicitation of an offer to buy, these securities in any state
where such
an offer or sale would not be
permitted. |
Subject
to Completion, dated October 25, 2006
PRICING
SUPPLEMENT NO. 5
DATED:
October [ ], 2006
(To
Prospectus dated August 16, 2006,
and
Prospectus Supplement dated August 16, 2006)
|
Rule 424(b)(2)
File
No. 333-136666
|
THE
BEAR STEARNS COMPANIES INC.
Medium-Term
Notes, Series B
Principal
Amount: $25,000,000
|
Floating
Rate Notes x
|
Book
Entry Notes x
|
Original
Issue Date: 10/[ ]/2006
|
Fixed
Rate Notes o
|
Certificated
Notes o
|
Maturity
Date: 10/[ ]/2046
|
CUSIP#:
[TBD]
|
|
Option
to Extend Maturity:
|
No
x
Yes
o Final
Maturity Date:
|
Redeemable
On
|
Redemption
Price(s)
|
Optional
Repayment
Date(s) *
|
Optional
Repayment
Price(s) *
|
N/A
|
N/A
|
October
[31], 2016
October
[31], 2017
October
[31], 2018
October
[31], 2019
October
[31], 2020
|
99.000%
99.250%
99.500%
99.750%
100.000%
|
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
|
o Commercial
Paper Rate
|
Minimum
Interest Rate: N/A
|
o Federal
Funds Effective Rate
|
|
o Federal
Funds Open Rate
|
Interest
Reset Date(s): **
|
o Treasury
Rate
|
Interest
Reset Period: Quarterly
|
o LIBOR
Reuters
|
Interest
Payment Date(s): ***
|
x LIBOR
Telerate
|
|
o Prime
Rate
|
|
o CMT
Rate
|
|
Initial
Interest Rate: [TBD]
|
Interest
Payment Period: Quarterly
|
Index
Maturity: Three months
|
|
Spread
(plus or minus): +0.15%
|
|
* |
The
Notes are repayable on each interest payment date, commencing October
31,
2016, upon at least 30 days’ prior written notice, at the prices
(expressed as percentages of the principal amount) and commencing
on the
interest payment dates set forth in the table. Commencing on October
31,
2020, and on each interest payment date thereafter prior to Maturity,
the
Notes will be repayable at 100% of the principal
amount.
|
** |
Commencing
January 31, 2007 and on the 31st of each April, July, October and
January
thereafter prior to Maturity.
|
*** |
Commencing
January 31, 2007 and on the 31st of each April, July, October and
January
thereafter prior to Maturity.
|
The
distribution of Notes will conform to the
requirements set forth in Rule 2720 of the NASD Conduct Rules.
CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The
Notes
will be taxed as variable rate debt securities as described under “Certain U.S.
Federal Income Tax Considerations—U.S. Federal Income Tax Treatment of the Notes
as Indebtedness for U.S. Federal Income Tax Purposes—Variable Rate Debt
Instruments” in the accompanying prospectus.
Prospective
investors seeking to treat the Notes as “qualified replacement property” for
purposes of section 1042 of the Internal Revenue Code of 1986, as amended,
should be aware that section 1042 requires us to meet certain requirements
in
order for the Notes to constitute qualified replacement property. In general,
qualified replacement property is a security issued by a domestic operating
corporation that did not, for the taxable year preceding the taxable year in
which such security was purchased, have “passive investment income” in excess of
25 percent of the gross receipts of such corporation for such preceding taxable
year (the “passive income test”). For purposes of the passive income test, where
the issuing corporation is in control of one or more corporations or such
issuing corporation is controlled by one or more corporations, all such
corporations are treated as one corporation (the “affiliated group”) when
computing the amount of passive investment income under section
1042.
We
believe that we are a domestic operating corporation and that less than 25
percent of our affiliated group’s gross receipts is passive investment income
for the taxable year ending December 31, 2005. In making this determination,
we
have made certain assumptions and used procedures which we believe are
reasonable. However, the calculation and characterization of certain types
of
income (as active or passive investment income) in certain of our affiliated
group is not entirely clear as there are no Treasury regulations or rulings
promulgated by the Internal Revenue Service that explain the calculation and
characterization of such income in similar circumstances. We cannot give any
assurances as to whether we will continue to be a domestic operating corporation
that meets the passive income test. In addition, it is possible that the
Internal Revenue Service may disagree with our determination of our status
as a
domestic operating corporation or the manner in which we have calculated our
affiliated group’s gross receipts (including the characterization thereof) and
passive investment income and the conclusions reached herein.
Additional
tax considerations are discussed under “Certain U.S. Federal Income Tax
Considerations” in the accompanying prospectus.
CERTAIN
ERISA CONSIDERATIONS
Investors
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code") and other benefit plan investors should review the section entitled
"ERISA Considerations" in the base prospectus. Investors should note the
discussion of the new statutory exemption in the recently enacted Pension
Protection Act of 2006 for transactions involving certain parties in interest
or
disqualified persons who are such merely because they are a service provider
to
a plan subject to ERISA and/or Section 4975 of the Code (a "Plan"), or because
they are related to a service provider. Generally, the new exemption would
be
applicable if the party to the transaction with the Plan is a party in interest
or a disqualified person to the Plan but is not (i) an employer, (ii) a
fiduciary who has or exercises any discretionary authority or control with
respect to the investment of the Plan assets involved in the transaction, (iii)
a fiduciary who renders investment advice (within the meaning of ERISA and
Section 4975 of the Code) with respect to those assets, or (iv) an affiliate
of
(i), (ii) or (iii). Any Plan fiduciary relying on this new statutory exemption
(Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code) and purchasing
securities on behalf of a Plan will be deemed to represent that (x) the
fiduciary has made a good faith determination that the Plan is paying no more
than, and is receiving no less than, adequate consideration in connection with
the transaction and (y) neither we nor our affiliates directly or indirectly
exercises any discretionary authority or control or renders investment advice
(as defined above) with respect to the assets of the Plan which such fiduciary
is using to purchase the Notes, both of which are necessary preconditions to
utilizing this new exemption. Any purchaser that is a Plan is encouraged to
consult with counsel regarding the application of the administrative and
statutory exemptions (including the new exemption discussed herein) described
in
the base prospectus.
A
fiduciary of a Plan or a plan subject to provisions of applicable federal,
state
or local law similar to the foregoing provisions of ERISA or the Code ("Similar
Law") purchasing the Notes, or in the case of certain IRAs, the grantor or
other
person directing the purchase of the Notes for the IRA, shall be deemed to
represent, by its purchase, that its purchase, holding, and disposition of
the
Notes does not constitute a non-exempt prohibited transaction under Section
406
of ERISA, Section 4975 of the Code or a non-exempt violation of Similar
Law.