8-KOther EventsExhibits & Filings

AMERICAN EXPRESS CO 8-K Report, Corporate Update (Aug 2, 2006)

Filed August 2, 2006For Securities:AXP

Summary

American Express Company (AXP) filed an 8-K on August 1, 2006, to report the issuance of $750 million in aggregate principal amount of 6.80% Subordinated Debentures due September 1, 2036, with an automatic extension option to September 1, 2066. This offering was conducted under an existing shelf registration statement and was made through a Terms Agreement with Citigroup Global Markets Inc. and Goldman, Sachs & Co. acting as underwriters. This issuance represents a significant debt financing event for American Express, indicating a strategy to raise capital through long-term debt. Investors should note the fixed 6.80% interest rate on these subordinated debentures, which carry a maturity of 30 years with a potential extension to 60 years. The sale was executed at a price of $987.06 per security, implying a slight discount to par value received by the company from the underwriters.

Key Highlights

  • 1Issuance of $750 million in 6.80% Subordinated Debentures.
  • 2Debentures mature on September 1, 2036, with an automatic extension option to September 1, 2066.
  • 3Debt offering was conducted under an existing Form S-3 shelf registration.
  • 4Citigroup Global Markets Inc. and Goldman, Sachs & Co. acted as underwriters.
  • 5The issuance was priced at $987.06 per security, indicating a nominal discount to the face value.
  • 6The debentures are subordinated in the company's capital structure.
  • 7The filing includes exhibits of the First Supplemental Indenture and forms of the debentures.

Frequently Asked Questions

This 8-K filing reports on the significant event of American Express issuing $750 million in subordinated debentures. It provides details about the terms of the debt, the underwriters involved, and the legal documentation associated with the issuance.

The Subordinated Debentures have an aggregate principal amount of $750 million, a fixed interest rate of 6.80% per annum, and a maturity date of September 1, 2036. They also include an automatic extension feature, allowing them to extend to September 1, 2066.

The issuance of $750 million in debt increases American Express's leverage. The fixed interest payments of 6.80% will be an ongoing expense. As subordinated debt, it ranks lower than senior debt in the event of liquidation, but higher than equity. This financing likely supports the company's operations, growth initiatives, or capital structure management.

Subordinated means that these debentures rank below other, more senior debt in the event of bankruptcy or liquidation. Holders of subordinated debt would only be repaid after senior debt holders have been fully satisfied. This subordination typically means investors demand a higher yield for the increased risk compared to senior debt.