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ALLSTATE CORP 8-K Report, Rights Modification (Mar 29, 2018)

Filed March 29, 2018For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

This 8-K filing by The Allstate Corporation on March 29, 2018, announces the successful closing of two significant financing transactions: a public offering of depositary shares representing interests in Series G Fixed Rate Noncumulative Perpetual Preferred Stock, and a public offering of Senior Notes. The Series G Preferred Stock offering, which included the exercise of an over-allotment option, introduces new preferred equity into Allstate's capital structure. A key implication for common stockholders is a restriction on dividends or share repurchases if dividends on the Series G Preferred Stock are not met, as detailed in the Certificate of Designations. The Senior Notes offering consists of two tranches: $250 million in Floating Rate Senior Notes due 2021 and $250 million in Floating Rate Senior Notes due 2023. These notes bear interest at floating rates tied to LIBOR plus a spread and mature in 2021 and 2023, respectively. These actions reflect Allstate's strategy to manage its capital structure and potentially fund future operations or acquisitions.

Key Highlights

  • 1Allstate Corp. successfully closed a public offering of 20,000,000 depositary shares, each representing a 1/1,000th interest in a share of Series G Fixed Rate Noncumulative Perpetual Preferred Stock.
  • 2An additional 3,000,000 depositary shares were purchased by underwriters to cover over-allotments, indicating strong demand for the preferred stock offering.
  • 3The issuance of Series G Preferred Stock imposes restrictions on Allstate's ability to pay dividends on or repurchase common stock if preferred dividends are not met.
  • 4Allstate also closed a public offering of $500 million in aggregate principal amount of Floating Rate Senior Notes, split between $250 million due 2021 and $250 million due 2023.
  • 5The Senior Notes bear interest at floating rates (three-month LIBOR plus a spread of 0.43% for the 2021 notes and 0.63% for the 2023 notes).
  • 6Interest on the Senior Notes will be paid quarterly, and the notes mature in March 2021 and March 2023.
  • 7These transactions were registered under Allstate's existing Form S-3 registration statement.

Frequently Asked Questions

The primary implication for common stockholders is a potential restriction on the company's ability to declare or pay dividends on, or purchase, redeem, or otherwise acquire shares of its common stock. This restriction is triggered if Allstate fails to declare and pay (or set aside) dividends on the Series G Preferred Stock for the preceding dividend period. Investors should review the Certificate of Designations for full details.

Allstate raised capital through the sale of Series G Preferred Stock (represented by depositary shares) and Senior Notes. While the exact proceeds from the preferred stock offering are not explicitly stated in dollar amounts for the initial offering and over-allotment in this filing, the Senior Notes offering raised a total of $500 million ($250 million for the 2021 notes and $250 million for the 2023 notes).

The $250 million Floating Rate Senior Notes due 2021 will bear interest at a floating rate equal to three-month LIBOR plus 0.43% per year, maturing on March 29, 2021. The $250 million Floating Rate Senior Notes due 2023 will bear interest at a floating rate equal to three-month LIBOR plus 0.63% per year, maturing on March 29, 2023. Interest payments are made quarterly.

Issuing both preferred stock and senior notes is a common corporate finance strategy to diversify funding sources, manage the company's capital structure, and potentially optimize its cost of capital. These offerings could be for general corporate purposes, to refinance existing debt, or to support strategic initiatives like acquisitions or growth.